Central bank pauses after 125 bps cuts, assesses Budget impact and growth outlook
The Monetary Policy Committee (MPC) of the Reserve Bank of India on Friday decided to keep the benchmark repo rate unchanged at 5.25 per cent and retain its “neutral” policy stance, signalling confidence in India’s growth momentum even as global uncertainties remain elevated.
The decision comes after the central bank delivered cumulative rate cuts of 125 basis points since February 2025, including a 25 basis point reduction in December. With inflation largely under control and the growth outlook improving, the MPC opted for a pause to assess the transmission of earlier easing measures.
Key takeaways from the February RBI MPC meeting
Repo rate and policy stance unchanged
The MPC kept the repo rate steady at 5.25 per cent and maintained a neutral stance, taking note of the economy’s healthy growth outlook amid recent trade agreements with the US and the European Union.
Inflation to remain within comfort zone
The RBI projected CPI inflation for FY26 at 2.1 per cent. Inflation is expected to rise to 3.2 per cent in Q4FY26, 4 per cent in Q1FY27 and 4.2 per cent in Q2FY27, remaining within the central bank’s tolerance band of 2–6 per cent.
Growth outlook revised upward
The central bank raised its real GDP growth forecast for FY26 to 7.4 per cent from 7.3 per cent earlier. Growth in Q1FY27 is projected at 6.9 per cent and Q2FY27 at 7 per cent, indicating sustained momentum.
Food inflation benign, risks persist
Food price pressures are expected to remain contained on the back of healthy kharif output, favourable rabi sowing, and adequate buffer stocks. However, geopolitical tensions, volatile energy prices and adverse weather conditions pose upside risks.
New GDP and inflation series to guide policy
Governor Malhotra said India will adopt a new series for GDP and inflation shortly, which will play a crucial role in shaping the MPC’s policy trajectory going forward.
Overall, the RBI struck a balanced tone, emphasising flexibility and vigilance while reaffirming its commitment to price stability and sustainable economic growth.
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