RBI Keeps Repo Rate Steady At 5.25% As US-Iran War Adds Pressure On India

RBI MPC Meeting 2026: In line with market expectation, the Reserve Bank of India kept repo rate unchanged at 5.25 percent on Friday. The decision, taken unanimously, comes after the six-member monetary policy committee held deliberations for two days. 

At the start of his address, RBI Governor Sanjay Malhotra pointed out that India remains confident to withstand geopolitical challenges while adding that global economic outlook remains clouded amid the ongoing Iran war. 

Further, the RBI governor said that weak monsoon could also impact growth and inflation. He, however, added that "adequate stocks provide comfort". 

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RBI Governor Sanjay Malhotra Address: Key Highlights:-

• FY25 GDP forecast kept unchanged at 7.6 per cent 
• MSF and Bank rate at 5.5%
• Core inflation stable at 3.7% in March-April
• CPI inflation for this 2026-27 projected to be 5.1%
• FDIs show continued interest of foreign investors in India.
• Despite FII outflows from Indian equities, India's forex reserve healthy
• The Crude Oil prices (Indian Basket) have averaged US$ 110/Barrel during the last 2 months
• Indications are that the average Crude Oil prices this year will be substantially higher than what was assumed during the last Policy
• The partial pass through of high global crude oil prices to Petrol and Diesel prices started in May 
• Considering all these factors, the CPI Inflation for this year is now projected at 5.1% , 50 basis points more than what was earlier projected

Rationale for Monetary Policy Decisions 

RBI Governor Sanjay Malhotra said, "The global environment has deteriorated since the last policy meeting with the conflict lingering amidst a fragile truce. The adverse implications of the extended disruption in supply chains and elevated energy prices are reflected in the moderation of growth and increase in inflation projections from the April policy as discussed above."  Follow Markets Live Updates

He added, "CPI inflation remains below the target despite the global shock as the passthrough to domestic prices has been limited. While the baseline projections point towards headline inflation firming up towards the upper tolerance level in Q3:2026-27, the impact of the supply shock is expected to wane Q4 onwards. The underlying  inflation pressures continue to remain benign at this juncture. However, generalisation of inflation through second-round effects on expectations and wages is a distinct possibility, warranting a close vigil.  The outlook also remains clouded by the sub normal south-west monsoon forecast and El Nino risks." 

The governor further said, "As for growth, elevated energy prices coupled with global supply constraints are having adverse spillovers on economic activity. While domestic demand remains resilient and manufacturing and services sectors activity continue to expand, there are incipient signs of moderation in some sectors as suggested by high frequency indicators."