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RBI keeps policy rate unchanged at 5.25% for fourth time in row
Jun-05-2026

Amid rising geopolitical tensions in West Asia and concerns over inflationary pressures, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) unanimously decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25 per cent for the fourth time in a row and second time in the current fiscal year. Consequently, the standing deposit facility (SDF) rate remains at 5.00 per cent and the marginal standing facility (MSF) rate and the Bank Rate remain at 5.50 per cent. The MPC also decided to continue with the neutral stance. 

On the inflation front, CPI inflation for 2026-27 is projected to be 5.1 per cent with Q1 at 4.2 per cent; Q2 at 5.1 per cent; Q3 at 5.9 per cent; and Q4 at 5.4 per cent. Core inflation is projected at 4.7 per cent for 2026-27. Excluding precious metals, core inflation is projected to be lower, suggesting that demand pressures remain contained. These forecasts are subject to upside risks due to global supply chain disruptions and uncertainty about the spatial and temporal distribution of monsoon. However, adequate stock of foodgrains and satisfactory reservoir levels provide some comfort.  

On the economy front, real gross domestic product (GDP) growth for 2026-27 is projected at 6.6 per cent, with Q1 at 6.6 per cent; Q2 at 6.3 per cent; Q3 at 6.5 per cent; and Q4 at 6.8 per cent. Prolonged global supply chain disruptions, heightened volatility in global financial markets, and weather-related shocks continue to pose downside risks to the domestic growth outlook. 

RBI further said private consumption has remained resilient so far, while fixed investment has also maintained its momentum despite rising cost pressures. Merchandise exports recorded strong growth in April 2026, notwithstanding elevated freight and insurance costs. Services exports continued to be robust. Overall, the economic situation has broadly exhibited resilience and withstood the conflict spillovers, although the impact of rising cost pressures is becoming visible. It noted that several measures undertaken by the government, including support to MSME and export sectors, efforts to ramp up domestic gas and crude supplies, encouraging use of domestically produced alternatives to imported inputs, and diversification of critical imports have strengthened the economy’s resilience to cope with external shocks.
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