Reserve Bank of India maintains repo rate at 5.25%

The Reserve Bank of India’s Monetary Policy Committee (MPC) has maintained the benchmark repo rate at 5.25%, signaling a cautious approach to future monetary adjustments. Meeting minutes released on August 19 indicate that while the committee unanimously voted to keep rates steady, there is significant scope for potential hikes if inflationary risks materialize.

RBI Governor Sanjay Malhotra emphasized the need for vigilance regarding second-round effects from elevated commodity prices, specifically food, fuel, and input costs. While headline consumer inflation was recorded at 4.45% in July—within the bank’s 2-6% tolerance band—the committee remains concerned about price expectations becoming unanchored. Geopolitical tensions in West Asia and rising oil prices are noted as key variables that could pressure the Indian rupee and fuel inflation.

The central bank has adjusted its economic outlook, lowering its inflation forecast for the current financial year to 5% from 5.1%, while raising its GDP growth projection to 6.7% from 6.6%. The MPC is adopting a “wait and watch” posture, monitoring global economic dynamics and domestic inflation trends ahead of the next scheduled review in October.