RBI Holds Rates Steady, Warns Of Global Risks
RBI Unanimously Holds Rates, Cites Global Uncertainty
MPC Stands United As RBI Keeps Rates Steady
RBI Holds Repo Rate, Watches Iran Conflict Closely
Mumbai — In a move broadly expected by markets, the Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday voted unanimously to keep the policy repo rate unchanged at 5.25 percent. The decision, taken at the second bi-monthly monetary policy meeting for FY27 held from June 3–5, signals a cautious pause by the central bank as it weighs mixed domestic momentum against mounting global headwinds.
RBI Governor Sanjay Malhotra, announcing the outcome, said the MPC conducted a detailed assessment of evolving macroeconomic and financial conditions before settling on the steady stance. Alongside the unchanged repo rate under the Liquidity Adjustment Facility (LAF), the Standing Deposit Facility (SDF) rate was set at 5 percent and the Marginal Standing Facility (MSF) and bank rate at 5.5 percent.
Growth and the global shadow
The central bank trimmed its real GDP growth forecast for FY27 to 6.6 percent, down from the 6.9 percent projected earlier. The downgrade reflects a confluence of external pressures: heightened global uncertainty, geopolitical tensions, supply-chain disruptions and rising energy prices. In short, India’s domestic momentum is solid but not immune to what happens overseas.
Malhotra emphasised that services exports are expected to remain robust even as global headwinds persist — a bright spot for an economy increasingly reliant on digital and services-led earnings. He also pointed to government measures aimed at cushioning the economy from external shocks, suggesting policy coordination at play.
Inflation: low now, risks ahead
Nonetheless, baseline projections indicate inflation could edge toward the upper tolerance band in the third quarter, driven by a mix of domestic and global factors.
Two specific risks stood out. First, the outlook for the monsoon is less certain than usual; a sub-normal monsoon could squeeze agricultural output and push food prices higher. Second, the possible emergence of El Niño conditions globally would add pressure to commodity and food prices, further clouding the inflationary outlook. “These are the tail risks that require vigilance,” Malhotra said, underlining why the MPC favoured a wait-and-watch approach.
Private consumption and cost pressures
At the same time, the RBI flagged that rising cost pressures are increasingly visible across sectors. Firms are reporting higher input costs, and some of that burden could be passed on to consumers if global commodity prices continue to firm up.
What it means going forward
For households and businesses, the near-term message is stability: borrowing costs remain at the current level while the RBI monitors incoming data. For markets, the decision reduces the immediate chance of rate volatility, but the trimmed growth forecast and the highlighted risks temper optimism.
Policymakers have chosen caution over bold action — a stance that recognizes India’s underlying strengths while acknowledging that the international environment could quickly alter the domestic picture. As the RBI watches monsoon updates, global commodity markets and inflation signals, future meetings could swing to adjust policy either way.
In short, the central bank is threading a narrow path: sustaining support for a still-growing economy while keeping an eye on inflationary sparks that could force its hand. For now, the repo rate stays at 5.25 percent — a steadying anchor in uncertain times.