India's central bank maintains policy repo rate at 5.50%
The RBI's MPC has kept the repo rate unchanged at 5.50 per cent, with the SDF at 5.25 per cent and the MSF and Bank Rate at 5.75 per cent. CPI inflation is expected to stay below the 4 per cent target this year, driven by food deflation, but may rise above it from Q4 FY26. Core inflation witnessed an uptick. The MPC will closely monitor data and growth-inflation dynamics.
Consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) remains unchanged at 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.75 per cent, the MPC said in its decision taken after assessing the current and evolving macroeconomic situation.
'This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,' the RBI said.
The MPC noted that the inflation outlook in the near term has become more benign than anticipated earlier, and the average CPI inflation this year is expected to remain significantly below the target. 'This is driven mainly by lower food inflation that entered deflationary territory in June,' the MPC headed by RBI Governor Sanjay Malhotra said.
'However, CPI inflation is likely to edge up above the 4 per cent target from Q4:2025-26 onwards. Moreover, core inflation has been rising steadily from the recent low of 3.6 per cent recorded during December-January 2024-25 and averaged 4.3 per cent in Q1 this year. Core excluding precious metals has witnessed an uptick and averaged 3.4 per cent in Q1,' the MPC added.
The MPC further resolved to maintain a close vigil on the incoming data and the evolving domestic growth-inflation dynamics to chart out the appropriate monetary policy path.
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