RBI keeps key lending rates unchanged at 5.25% in last MPC of FY26

The Reserve Bank of India’s Monetary Policy Committee on Friday decided to keep the key policy repo rate unchanged at 5.25% in its last meeting of FY26. The decision was taken unanimously as inflation remains close to target and economic growth continues to hold up despite global risks.

The RBI Governor said the committee carefully reviewed domestic and global conditions before taking the decision.

“The MPC voted unanimously to keep the policy repo rate unchanged at 5.25%,” he said. “Consequently, the SDF rate remains at 5% and the MSF rate and the bank rate at 5.5%,” the Governor said.

The policy stance has also been retained. “The MPC also decided to continue with a neutral stance,” he said.

He added that the committee believes the current rate level is appropriate.

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

INFLATION TRENDS SUPPORT STATUS QUO

The RBI Governor said inflation trends have been supportive of keeping rates unchanged.

“Headline inflation during November and December remained below the tolerance band of the inflation target,” he said.

He said inflation projections for the next financial year remain close to the target. “The revised outlook for CPI inflation in Q1 and Q2 of next year is placed at 4% and 4.2%, respectively,” the Governor said.

He added that the projections have been revised slightly upwards.

“The slight upward revision is primarily due to an increase in prices of precious metals,” he said.

He explained the impact of these prices.

“These contribute about 60 to 70 basis points,” the Governor said.

He added that core inflation pressures remain low.

“The underlying inflation continues to be low,” he said.

GROWTH REMAINS STEADY

On growth, the Governor said economic activity continues to show resilience.

“Economic activity remains resilient,” he said.

He referred to official estimates.

“The first advance estimates suggest continuing growth momentum driven by domestic factors,” the Governor said.

He added that this is happening even as global conditions remain difficult.

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

GLOBAL RISKS AND EXTERNAL FACTORS

The RBI Governor said global conditions remain mixed.

“With the signing of a landmark trade deal with the European Union and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period,” he said.

However, he warned that risks remain elevated.

“The confluence of escalating geopolitical friction and rising trade tensions is unravelling the existing world economic order,” the Governor said.

He also pointed to uneven inflation across countries.

“Inflation outcomes are heterogeneous across jurisdictions, remaining above target in most advanced economies,” he said.

This, he said, has led to varied policy actions globally.

“This is prompting divergence in monetary policy actions as central banks near the end of their current easing cycles,” he said.

The Governor said bond markets remain cautious.

“Bond market sentiments remain bearish, reflecting fiscal sustainability concerns,” he said.

At the same time, equity markets continue to perform well.

“Equity markets driven by tech stocks remain upbeat,” he said.

POLICY OUTLOOK

Looking ahead, the Governor said future policy decisions will depend on incoming data.

“Going forward, the MPC will be guided by the evolving macroeconomic conditions and the outlook,” he said.

He also highlighted upcoming changes in official data.

“In a few days we will have a new series for both GDP as well as inflation,” the Governor said.

He added that this data will guide future actions.

“Monetary policy actions will be charted based on the data from the new series,” he said.