RBI Holds Repo Rate at 5.25% Amid Global Uncertainty: Key Policy Takeaways

The Reserve Bank of India’s Monetary Policy Committee today decided to keep the repo rate unchanged at 5.25%, extending its pause as global uncertainties continue to weigh on the economic outlook. Following are the key highlights from the Monetary Policy announcement: 

DECISION

• MPC voted to retain repo rate at 5.25%
• MPC decided to continue neutral stance
• Prudent to wait and watch changing circumstances
  
  

ASSESSMENT

• Global economy facing unprecedented challenges
  
• Fundamentals of Indian economy on stronger footing
  
• Heightened uncertainty by ongoing conflict weighing on outlook
  
• Geopolitical uncertainties increased since last policy
  
• Upside risks to inflation outlook increased
  
• Core inflation pressures remain muted
• Fundamentals of the Indian economy are on a stronger footing.
  
• India's external sector indicators remain favourable
  
• Transmission in credit market has remained satisfactory
  
• Credit growth remained broad based 

OUTLOOK

• Elevated crude oil prices to increase imported inflation
• Adverse spillovers from global markets could tighten domestic financial conditions
  
• FY27 Baseline assumption for crude oil price at $85 per barrel
  
  

GROWTH

• Estimates FY27 GDP growth at 6.9%
  
• Revises April-June GDP growth estimate to 6.8% from 6.9% earlier
  
• Revises July-September GDP growth estimate to 6.7% from 7.0% earlier
  
• Estimates January-March GDP growth at 7.2%
  
• Structural model forecast indicate FY28 GDP growth at 6.6% 

INFLATION

• Estimates FY27 CPI inflation at 4.6%
  
• April-June CPI inflation estimated at 4.0%
  
• Revises July-September CPI inflation estimate to 4.4% from 4.2% earlier
  
• Estimates October-December CPI inflation at 5.2%
  
• Food prices outlook remains comfortable in near term
• Estimates January-March CPI inflation at 4.7%
  
• FY27 core inflation seen at 4.4%, providing this forecast for the first time.
  
• Structural model estimates indicate FY28 inflation at 4.6% 

FOREX

• Exchange rate policy remains unchanged
  
• Not targeting any specific level or band for rupee
  
• Will continue to contain excessive or disruptive volatility in FX market
  
• Safe-haven demand could impact domestic liquidity conditions
  
• To ensure sufficient liquidity in the banking system
• To be proactive and pre-emptive in liquidity management

REGULATORY

• Enhancing borrowing limit of standalone primary dealers in term money market
• To dispense with requirement to maintain investment fluctuation reserve for banks