3 weeks ago
RBI holds repo rate at 5.25%, raises FY27 growth forecast
The Reserve Bank of India is the big bank that decides how expensive it is for other banks to borrow money.
It decided to keep the cost at 5.25 per cent, which means it didn't change anything this time.
The bank wants to wait and watch before making any changes because it's not sure how prices of things will go in the future.
Prices going up is called inflation, and the bank wants prices to stay calm.
The bank thinks India will grow a little faster this year, so it raised its growth forecast.
It also thinks inflation will be a bit lower than it earlier thought.
But the bank's leader said the future is a bit foggy, like looking through a 'hazy' window.
There are worries about weather, like not enough rain and El Niño, and about problems in other parts of the world.
Experts who watch the bank say the decision was not a surprise.
Some think the bank might raise the cost later if prices keep going up.
The Reserve Bank of India kept the repo rate unchanged at 5.25 per cent and retained its neutral stance.
The RBI raised its FY27 GDP growth forecast to 6.7 per cent from 6.6 per cent projected in June.
The central bank trimmed its FY27 inflation estimate to 5 per cent from 5.1 per cent, with inflation expected to peak at 5.9 per cent in the third quarter.
RBI governor Sanjay Malhotra said the outlook remained 'hazy' due to uncertainty around the southwest monsoon, El Niño conditions, geopolitical tensions and global trade policies.
Economists said the policy was largely on expected lines, with Kotak Mahindra Bank seeing scope for a 50 basis point rate hike in H2FY27 if inflation stays elevated.
Consumer price inflation accelerated to 4.4 per cent in June after remaining below the RBI's 4 per cent target for 16 consecutive months.
Climate and external risks to growth include geopolitical tensions in West Asia, global financial market volatility and weather-related disruptions.
- Who
- The Reserve Bank of India (RBI) and its governor Sanjay Malhotra, along with economists from Kotak Mahindra Bank, CareEdge Ratings and Crisil.
- What
- The RBI kept the repo rate unchanged at 5.25 per cent, retained its neutral stance, raised its FY27 GDP growth forecast to 6.7 per cent and trimmed its inflation estimate to 5 per cent.
- Where
- India.
- When
- Wednesday, following the Monetary Policy Committee (MPC) meeting.
- Why
- The RBI chose to wait for greater clarity on inflation amid an uncertain global and domestic environment, including monsoon uncertainty, emerging El Niño conditions, geopolitical tensions and global trade policies.
Key facts
- Repo rate
- 5.25 per cent
- Monetary policy stance
- Neutral
- FY27 GDP growth forecast
- 6.7 per cent (raised from 6.6 per cent)
- FY27 CPI inflation forecast
- 5 per cent (trimmed from 5.1 per cent)
- Inflation peak forecast
- 5.9 per cent in Q3 FY27
- June CPI inflation
- 4.4 per cent
- RBI inflation target
- 4 per cent
- RBI governor
- Sanjay Malhotra
Quotes
Sanjay Malhotra
Governor of the Reserve Bank of India
“"Although generalised inflation pressures continue to remain modest so far, the risks of second‑round impact of higher food, fuel and other input prices translating to broad‑based inflation persist"”
telegraphindia.com
“"We continue to see scope for a 50 basis points rate hike in H2FY27, especially as Q1FY28 inflation also continues to look above 5 per cent"”
telegraphindia.com
Sources
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