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Below the RBI MPC Commentary August 2026 by Shashwat Singh, Fundamental Analyst, Bajaj Broking

RBI Holds Policy Repo Rate at 5.25% with Neutral Stance Amid Supply-Side Inflation Risks and Resilient Growth Outlook

The Reserve Bank of India’s Monetary Policy Committee unanimously voted to keep the policy repo rate unchanged at 5.25%, maintaining the standing deposit facility rate at 5.00% and both the marginal standing facility rate and Bank Rate at 5.50%. The committee retained its neutral stance to respond to macroeconomic developments while remaining resolute in aligning inflation with the target.

Domestic economic growth activity remains resilient, supported by robust private consumption, investment indicators, and expanding services and merchandise exports. Real GDP growth for FY2026-27 is projected at 6.7% (Q1: 7.0%, Q2: 6.4%, Q3: 6.5%, Q4: 6.8%), with Q1:2027-28 growth projected at 7.3% under evenly balanced risks.

CPI inflation rose to 4.4% in June 2026 due to food price pressures and elevated fuel costs. Annual CPI inflation for 2026-27 is projected at 5.0%, expected to peak at 5.9% in Q3 before moderating to 5.5% in Q4. Core inflation is projected at 4.3% for 2026-27, while core inflation excluding precious metals remains benign at 2.3–2.5%.

External downside risks stem from renewed West Asia geopolitical conflict, volatile global oil prices, a hawkish Federal Reserve tone, and market volatility. Domestically, deficient and uneven south-west monsoon rainfall amidst El Ni onditions poses risks to agricultural output and rural demand.

Near-term headline inflation spikes are predominantly supply-side driven by food and fuel without broad-based generalisation, immediate rate adjustments were deemed unwarranted. The committee will maintain close vigil on monsoon patterns, El Ni evelopments, and global uncertainties before taking future policy action.

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