RBI Holds Repo Rate at 5.25%, Raises FY27 Inflation Forecast to 5.1% Amid Global Uncertainty

The Reserve Bank of India (RBI) has opted for monetary caution amid a more challenging global environment, keeping its benchmark repo rate unchanged at 5.25% following its June 2026 Monetary Policy Committee (MPC) meeting. The six-member committee voted unanimously to hold rates and retain its neutral policy stance — a decision widely expected by markets, coming after the central bank had already delivered a cumulative 100 basis points of rate cuts during the FY25-26 period.

RBI Governor Sanjay Malhotra said the global economic environment has become more challenging in recent months, citing geopolitical tensions, volatility in financial markets, and weakening business sentiment as sources of heightened global uncertainty. The ongoing conflict in West Asia and rising energy prices remain key concerns for policymakers. The Governor noted that demand for safe-haven assets has increased, creating additional pressure on global currency markets, and that several major central banks are becoming more cautious and could lean toward tighter policies if inflation risks rise.

On the inflation front, the RBI acknowledged that price pressures are likely to rise in the coming months. While underlying inflation pressures remain manageable, the central bank raised its FY27 inflation forecast to 5.1%, with core inflation projected at 4.7%. Governor Malhotra flagged food inflation as a key concern. Despite these pressures, the RBI maintained that domestic economic activity remains resilient and that inflation pressures are largely under control.

The RBI also announced measures to attract foreign investment, liberalizing foreign portfolio investment norms for government securities, expanding the Fully Accessible Route (FAR), and increasing investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equity instruments. It removed certain short-term investment and concentration limits for foreign investors in government bonds. The central bank reiterated its commitment to maintaining adequate liquidity in the banking system to support economic growth, while emphasizing that both growth and inflation forecasts remain dependent on how global developments unfold.