Financial News: India Central Bank Holds Key Interest Rates Steady

India Central Bank Holds Key Interest Rates Steady

(RTTNews) - The Reserve Bank of India maintained its key interest rates for the fourth consecutive meeting on Wednesday as policymakers await clarity on inflation path.

The RBI Monetary Policy Committee, led by Governor Sanjay Malhotra, unanimously decided to hold the policy repo rate at 5.25 percent. Policymakers also decided to continue with the neutral stance.

The RBI had reduced the repo rate by a cumulative 125 basis points in the latest easing cycle that began in February 2025.

The RBI chief said headline inflation edged up above the target, as expected. Inflation is expected to rise further in the near-term and peak in the December quarter primarily due to food and fuel prices, before moderating thereafter.

Malhotra observed that headline inflation is set to increase but it is primarily on account of supply side pressures caused by food and fuel. Inflation is not getting broad-based, the governor noted.

CPI inflation for the fiscal year 2026-27 is projected to be 5.0 percent, slightly slower than the previous forecast of 5.1 percent.

Core inflation is estimated at 4.3 percent for 2026-27 compared to the earlier estimate of 4.7 percent. This measure is also forecast to decline after attaining a peak in the December quarter.

Regarding the economic growth, Malhotra said expansion continued to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports, reaffirming India's position as the world's fastest-growing major economy.

Although resilient, growth is forecast to be lower in 2026-27, he said. However, the outlook is hazy because of the uncertainties regarding south-west monsoon, El Nino, geopolitics and global trade policy, Malhotra said.

The bank raised its real GDP growth outlook for fiscal year 2026-27 marginally to 6.7 percent from 6.6 percent.

"There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action," Malhotra said. "Any such action would also have to consider the need for recalibration of policy rates in line with the evolving growth-inflation dynamics, especially the normalization of the underlying inflation from its benign levels seen hitherto," the governor added.

The bank acknowledged that measures undertaken in June to boost capital inflows have yielded results and the balance of payments is expected to register a healthy surplus this year.

The RBI also affirmed that it would continue to let market forces determine the currency exchange rate, but will take steps to curb excessive volatility, check speculative behavior and prevent disorderly movements to ensure that it is not out of sync with fundamentals or disruptive of economic activity.

For comments and feedback: contact editorial@rttnews.com

Copyright(c) 2026 RTTNews.com. All Rights Reserved

Market News provided by RTTNews