RBI Holds Benchmark Rate at 5.25% for Fifth Consecutive Review Amidst Inflation Watch
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- RBI holds 5.25% rate for fifth consecutive time, unanimously.
- Inflation above target, projected to rise further, peaking Q3 2026-27.
- Governor Sanjay Malhotra: stance is “neither dovish nor hawkish”.
- Rupee may strengthen on de-escalation; policy transmission complete.
The Reserve Bank of India (RBI) is widely anticipated to maintain its benchmark repurchase rate at 5.25% during its bi-monthly monetary policy decision on Wednesday, August 5, scheduled for 10:00 AM IST (04:30 GMT). This expectation is supported by a Reuters poll showing 68 out of 72 economists forecasting a hold, with analysts like Commerzbank also aligning with this view. Policymakers are reportedly assessing whether elevated energy costs stemming from the ongoing Middle East conflict will translate into broader inflationary pressures, even as current inflation remains within the central bank’s target range. India’s stance as an outlier among emerging and developed markets that have already raised rates in response to the oil-price shock leaves the Indian Rupee (INR) vulnerable. The lack of widening rate differentials with other major economies continues to weigh on the currency, despite approximately $40 billion in foreign capital inflows attracted by measures such as capital-gains tax adjustments and dollar deposit incentives.
The Reserve Bank of India (RBI) has maintained its benchmark interest rate at 5.25%. This marks the fifth consecutive time the central bank has held rates steady, a move that was largely as expected by the market. The decision reflects the RBI’s ongoing vigilance over inflation, particularly concerning potential spillover from higher energy costs related to the Iran war and broader creeping inflation.
The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously decided to maintain the policy repo rate at 5.25%. The central bank also confirmed its neutral stance. RBI Governor Sanjay Malhotra stated that headline inflation has edged up above the target, as anticipated, and is projected to rise further in the near-term, peaking in the third quarter of 2026-27, primarily driven by food and fuel prices. Standard Chartered Bank’s Head of India Economic Research, Anubhuti Sahay, noted that while India’s inflation has been benign, the cushion is thinner than it appears.
RBI Governor Sanjay Malhotra clarified the central bank’s stance, stating it is “neither dovish nor hawkish”, with an endeavor to bring inflation in line with target over the medium term. He also suggested that the Rupee may strengthen if geopolitical tensions de-escalate, and noted that monetary policy transmission is “more or less complete”. Additionally, it was reported that the RBI had previously reduced the repo rate by a cumulative 125 basis points in an easing cycle that began in February 2025.