September 18, 2025
September 10, 2025
July 3, 2025
January 10, 2025
August MPC: RBI Holds Repo Rate at 5.25%, GDP Forecast Raised to 6.7%
Author
Shoonya Team
The Reserve Bank of India’s Monetary Policy Committee kept the repo rate unchanged at 5.25% on August 5, retaining its neutral stance after a three-day meeting from August 3 to 5. The decision was unanimous, with all six members voting to hold. This marks the second consecutive review at which the MPC chose to wait for greater clarity on the inflation outlook before recalibrating policy.
RBI August 2026 Policy Decision
| Rate | Level | Change |
|---|---|---|
| Policy Repo Rate | 5.25% | Unchanged |
| Standing Deposit Facility | 5.00% | Unchanged |
| Marginal Standing Facility | 5.50% | Unchanged |
| Bank Rate | 5.50% | Unchanged |
| Policy Stance | Neutral | Retained |
| MPC Vote | 6-0 | Unanimous |
Why Did the RBI Keep Repo Rate Unchanged?
Governor Sanjay Malhotra said underlying inflation has remained under control and the increase in headline CPI was largely driven by food and fuel prices, with little sign of generalisation of price pressures. He added that there is a need for greater clarity, especially regarding inflation, its path, and composition, before taking any policy action.
The MPC’s rationale rested on three factors:
- The inflation pickup is a supply-side story driven by food and fuel, not broad-based demand pressure
- Core inflation excluding food and fuel held steady at 3.9%, with core inflation excluding precious metals even lower at 2.3-2.5%
- Uncertainty around the monsoon, El Niño, geopolitical conflict, and global trade policy clouds the near-term picture
The Committee explicitly left the door open to future recalibration in either direction, making this a wait-and-watch pause rather than a signal that the rate cycle is complete.
RBI Raises FY27 GDP Forecast to 6.7%: Quarter-Wise Breakdown
The MPC raised its FY27 GDP growth forecast to 6.7% from 6.6% previously. India’s Q1 2026-27 high-frequency data showed robust private consumption, resilient investment activity across construction, capital goods, and bank credit, alongside sustained services exports and a rebound in merchandise shipments.
| Quarter | Real GDP Growth Forecast |
|---|---|
| Q1 2026-27 | 7.0% |
| Q2 2026-27 | 6.4% |
| Q3 2026-27 | 6.5% |
| Q4 2026-27 | 6.8% |
| Q1 2027-28 | 7.3% |
| FY 2026-27 Full Year | 6.7% |
RBI Projects CPI Inflation at 5% for FY27, Peak at 5.9% in Q3
The MPC lowered its CPI inflation projection for FY27 to 5% from 5.1% previously. Headline inflation is expected to peak in the October-December quarter before easing.
| Quarter | CPI Inflation Forecast |
|---|---|
| Q2 2026-27 | 4.7% |
| Q3 2026-27 | 5.9% |
| Q4 2026-27 | 5.5% |
| Q1 2027-28 | 5.3% |
| FY 2026-27 Full Year | 5.0% |
| Core Inflation FY 2026-27 | 4.3% |
CPI rose to 4.4% in June 2026, ending a 16-month streak below the 4% target. The increase was driven mainly by food and fuel rather than broad demand pressure. Key inflation risks going forward include erratic rainfall distribution under El Niño and continued oil price volatility driven by geopolitical developments in West Asia.
What Global Factors Shaped the RBI’s August Policy Decision?
The MPC noted several international developments that shaped its assessment:
- The temporary ceasefire in West Asia broke down in July 2026, reintroducing energy-price risk
- The US dollar has strengthened on elevated yields, a hawkish Federal Reserve tone, and AI-driven productivity gains
- Global equities remain volatile as investors reprice exposure to AI-related stocks
- Central banks globally are diverging, with some raising rates on persistent inflation and others holding steady
How Does the RBI’s Rate Hold Impact Key Sectors?
| Sector | Bias | Assessment |
|---|---|---|
| Banking and NBFCs | Watch | Net interest margins stay stable; the October review is the next focal point |
| Real Estate and Housing | Positive | Home loan rates unchanged, supporting steady EMI expectations |
| Autos and Consumer Durables | Watch | Steady financing costs are supportive; higher fuel inflation is a modest drag |
| FMCG and Rural Demand | Negative | Most exposed to monsoon risk; food inflation raises input costs |
| IT and Export-Oriented Sectors | Positive | A stronger US dollar is a modest positive for IT services and export earnings |
| Infrastructure and Capital Goods | Positive | Resilient investment activity and stable rates support long-gestation projects |
| Bond Markets | Watch | Neutral stance suggests two-way risk; yields likely range-bound with upward bias into Q3 print |
| Currency | Negative | Rupee faces external pressure from a hawkish Fed and a stronger dollar |
| Agriculture | Negative | The uneven monsoon under El Niño remains the single largest swing factor |
RBI MPC: Next Meeting and Minutes Release Schedule
| Date | Event |
|---|---|
| August 19, 2026 | MPC meeting minutes to be published |
| October 5-7, 2026 | Next MPC meeting |
Final Outlook
This is a hold-and-watch decision, not a signal that the rate cycle is over. The RBI has framed the projected 5.9% Q3 inflation peak as a supply-side outcome driven by food and fuel, rather than a demand-led concern. Core inflation, while still benign excluding precious metals, is expected to normalise upward through the year. Growth at 6.7% for FY27 remains healthy but is set to moderate from Q1’s 7.0% print.
Source: Times of India
Explore Our Offerings
Stocks
Trade equities across NSE and BSE with zero delivery charges. Invest, hold or sell with a seamless experience.
Future & Options
Execute complex strategies with simple tools and real-time data.
IPOs
Apply to the latest IPOs in just a few taps. Stay updated and capture opportunities as they open.