Status Quo on Rates: RBI Keeps Repo Rate Unchanged at 5.25% in Last FY26 MPC

The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday unanimously decided to keep the key policy repo rate unchanged at 5.25% in its final meeting of FY26, citing stable inflation and resilient economic growth despite global uncertainties.

Announcing the decision, the RBI Governor said the committee undertook a detailed assessment of both domestic and global macroeconomic conditions before opting for a status quo. “The MPC voted unanimously to keep the policy repo rate unchanged at 5.25%,” the Governor said. “Accordingly, the standing deposit facility (SDF) rate remains at 5%, while the marginal standing facility (MSF) rate and the bank rate stand at 5.5%.”

He added that the committee was of the view that the current policy stance remains appropriate. “Based on a comprehensive review of the domestic macroeconomic conditions and the outlook, the MPC felt that the current policy rate is appropriate,” he said.

Inflation trends support pause

The Governor said recent inflation trends provided room for the MPC to maintain rates. “Headline inflation during November and December remained below the tolerance band of the inflation target,” he noted.

Inflation projections for the next financial year remain close to the RBI’s 4% target, though with a slight upward revision.

“The revised outlook for CPI inflation in Q1 and Q2 of the next financial year is placed at 4% and 4.2%, respectively,” he said, adding that the upward adjustment was mainly due to higher prices of precious metals.

“These account for around 60 to 70 basis points of the revision,” the Governor said, while stressing that underlying inflationary pressures remain muted.

• “Core inflation continues to remain low,” he added.
• Growth outlook remains resilient

On the growth front, the Governor said the Indian economy continues to display resilience.

“Economic activity remains resilient,” he said, citing official estimates. “The first advance estimates suggest that growth momentum is being sustained, largely driven by domestic demand.”

He added that this resilience persists despite an uncertain global backdrop.

“This is happening amid a challenging external environment,” he said.

Global risks remain elevated

The Governor noted that global economic conditions remain mixed, even as some positive developments emerge. “With the signing of a landmark trade deal with the European Union and a US trade agreement in sight, global growth momentum could be sustained for a longer period,” he said.

However, he cautioned that risks remain elevated.

“The confluence of escalating geopolitical tensions and rising trade frictions is unravelling the existing global economic order,” the Governor warned.

He also highlighted uneven inflation trends globally.

“Inflation remains above target in most advanced economies,” he said, leading to divergent monetary policy actions as central banks approach the end of their easing cycles. On financial markets, the Governor said bond markets remain cautious due to fiscal concerns, while equities continue to show strength.

“Bond market sentiment remains bearish, reflecting fiscal sustainability concerns, even as equity markets—driven by technology stocks—remain upbeat,” he said.

Policy outlook

Looking ahead, the Governor said future policy decisions will be guided by evolving macroeconomic data. “Going forward, the MPC will remain data-dependent and be guided by the evolving macroeconomic outlook,” he said.

He also flagged an upcoming change in official data series.

“In the coming days, a new series for both GDP and inflation will be released,” the Governor said, adding that future monetary policy actions will be calibrated based on data from the new series.