The Monetary Policy Committee (MPC) after assessing the current and evolving macroeconomic situation, voted to maintain the policy repo rate at 5.50%.
Consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) remains unchanged at 5.25% and the marginal standing facility (MSF) rate and the Bank Rate at 5.75%.
This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4%within a band of +/- 2%, while supporting growth.
Taking various factors into account, projection for real GDP growth for 2025-26 has been retained at 6.5%, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%.
Real GDP growth for Q1:2026-27 is projected at 6.6%. The risks are evenly balanced.
The MPC observed that inflation outlook for 2025-26 has become more benign than expected in June.
Large favourable base effects combined with steady progress of the southwest monsoon, healthy kharif sowing, adequate reservoir levels and comfortable buffer stocks of foodgrains have contributed to this moderation.
CPI inflation, however, is likely to edge up above 4% by Q4:2025-26 and beyond, as unfavourable base effects, and demand side factors from policy actions come into play. Barring any major negative shock to input prices, core inflation is likely to remain moderately above 4 per cent during the year, the MPC observed.
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Weather-related shocks pose risks to inflation outlook, it added.
Considering all these factors, CPI inflation for 2025-26 is now projected at 3.1% as compared with 3.7% projected in June 2025 with Q2 at 2.1%; Q3 at 3.1%; and Q4 at 4.4%. CPI inflation for Q1:2026-27 is projected at 4.9% (Chart 2). The risks are evenly balanced.
RBI governor Sanjay Malhotra in his monetary policy statement said together with supportive policies of the Government and the Reserve Bank, augurs well for the Indian economy in the near term, as geopolitical uncertainties have somewhat abated, even though global trade challenges continue to linger.
“Over the medium-term also, the Indian economy holds bright prospects in the changing world order drawing on its inherent strength, robust fundamentals, and comfortable buffers. Opportunities are there for the taking, and we are making all efforts to create enabling conditions through a multi-pronged yet cohesive approach to policymaking,” he said.
“Globally, policy makers are faced with muted growth and slowing pace of disinflation, with some advanced economies even witnessing an uptick in inflation. As the dust settles and a new equilibrium emerges in the new global order, policymakers will have a tough task navigating a world characterised by modest growth, sticky inflation and elevated public debt levels,” he added.
He said the RBI has taken decisive and forward-looking measures to support growth. “The coordinated use of various tools available to us has helped accelerate monetary policy transmission in the current easing cycle,” he said.
Mr Malhotra said that MPC noted that, while headline inflation is much lower than projected earlier, it is mainly due to volatile food prices, especially of vegetables.
“Core inflation,on the other hand, has remained steady around the 4 per cent mark, as anticipated. Inflation is projected to go up from the last quarter of this financial year,” he said.
“Growth is robust and as per earlier projections though below our aspirations. The uncertainties of tariffs are still evolving. Monetary policy transmission is continuing. The impact of the 100 bps rate cut since February 2025 on the economy is still unfolding,” he said.
“On balance, therefore, the current macroeconomic conditions, outlook and uncertainties call for continuation of the policy repo rate of 5.5 per cent and wait for further transmission of the front-loaded rate cut to the credit markets and the broader economy,” he added.
Accordingly, the MPC unanimously voted to keep the repo rate unchanged, he said explaining the rationale behind the decision.
The MPC further resolved to maintain a close vigil on the incoming data and the evolving domestic growth-inflation dynamics to chart out the appropriate monetary policy path. Accordingly, all members decided to continue with the neutral stance, he stated.
Published – August 06, 2025 11:02 am IST
