MPC Keeps Policy Rates Unchanged At 5.25%, Raises FY27 GDP Forecast To 6.7%
· Free Press Journal
The Monetary Policy Committee of the Reserve Bank of India (RBI) on Wednesday decided to keep the repo rate unchanged at 5.25 percent amid the renewed West Asia crisis and rising inflation pressure.
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The MPC also maintained a ‘neutral’ stance.
The Standing Deposit Facility (SDF) rate stays at 5 percent, while the Marginal Standing Facility (MSF) and Bank Rate remain at 5.50 percent.
The RBI also raised the FY27 GDP forecast by 10 basis points to 6.7%.
RBI Governor Sanjay Malhotra expressed hope that robust domestic demand will continue to support growth. Malhotra said the economy continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports.
He said that underlying inflation, as reflected by core inflation excluding precious metals, has remained benign for some time and is expected to align with core inflation towards the end of the financial year.
He said that while headline inflation is projected to rise, the increase is primarily due to supply-side pressures from food and fuel.
RBI Governor Sanjay Malhotra said realised inflation in Q1 remained marginally lower than projections, reflecting limited pass-through of cost pressures.
He said the recent rise in inflation has been driven mainly by food and fuel, with little evidence of broader price pressures so far.
Headline inflation is expected to rise further in the near term and peak in Q3 of FY27, primarily due to food and fuel, before moderating thereafter.
Excluding precious metals, underlying inflation remains benign and in line with earlier projections.
"The outlook, however, is hazy because of the uncertainties regarding South's global trade policy. There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action," Malhotra said.