The Reserve Bank of India (RBI) kept its key repo rate unchanged at 5.25% for the second consecutive meeting and maintained a neutral policy stance in its first monetary policy decision of fiscal year 2026/27. The move came against the backdrop of a weakening rupee and rising bond yields and was broadly in line with market expectations, as the war in Iran weighed on GDP growth prospects and added to inflationary pressures.
On the outlook, the RBI raised its GDP growth forecast for FY2025/26 to 7.6%, up from its earlier estimate of 7.4%, while inflation is expected to stay below the central bank’s 4% target. For FY2026/27, GDP growth is projected at 6.9%, with the first half of the year expected to grow by 6.9%. Growth in the second half has been revised down to 6.8% from 7%.
Inflation for FY2026/27 is forecast at 4.6% overall, with quarterly projections of 4.0% in Q1, 4.4% in Q2, 5.2% in Q3, and 4.7% in Q4.
