Industry Odisha Bureau, Aug 5: The Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.25%. They have opted for caution as inflation risks remain uncertain despite a stronger growth outlook. The Monetary Policy Committee (MPC) took an unanimous decision after their latest meeting. Therein, all six members voted to retain both the repo rate and the Central bank’s neutral policy stance.
RBI Governor Sanjay Malhotra said that the central bank needs “greater clarity” on the trajectory of inflation before considering any change in policy. While inflation remains largely driven by food and fuel prices, RBI warned that weather uncertainties, especially the impact of El Nino on monsoon, could influence food prices in the coming months. Key risks to inflation and economic stability could be sising crude oil prices, geopolitical tensions in West Asia and global trade uncertainties.
Despite the concerns, the RBI struck a more optimistic note on economic growth. It raised India’s GDP growth forecast for FY27 to 6.7%.
Notably, the central bank also lowered its inflation forecast for the current financial year to 5%. It noted that core inflation remains largely contained despite recent increases in food and fuel prices. Headline inflation is expected to rise in the near term. Meanwhile, it is also expected to ease later in the financial year.
With the RBI repo rate unchanged, borrowers with floating rate home, vehicle and other loans linked to the benchmark are unlikely to see any immediate change in their EMIs. Lending and deposit rates are expected to remain broadly stable unless liquidity conditions change significantly.
