RBI Holds Key Lending Rate Steady at 5.25%, Maintains Neutral Policy Stance

The RBI kept its key policy repo rate unchanged at 5.25%, maintaining the same level since December 2025. Governor Sanjay Malhotra announced that the Monetary Policy Committee (MPC) unanimously decided to hold rates steady after reviewing macroeconomic conditions and financial trends. Policymakers adopted a cautious approach as global uncertainty continues to rise, particularly due to the ongoing West Asia conflict.

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Inflation Risks Rise Despite Current Stability

The Governor emphasized that geopolitical tensions have intensified since the last policy meeting, creating a challenging external environment. While inflation currently remains under control and below the target, risks are beginning to increase. Rising energy prices and potential weather-related disruptions to food supply could push inflation upward in the coming months, prompting the central bank to remain vigilant.

The RBI noted that core inflation remains relatively stable, indicating limited underlying price pressures. However, concerns persist over possible supply chain disruptions and second-round effects that could influence future inflation trends. Given these uncertainties, the MPC chose to adopt a “wait and watch” strategy rather than making immediate policy adjustments, ensuring flexibility in responding to evolving global and domestic conditions.

On the growth front, the RBI highlighted strong economic momentum driven by consumption and investment. High-frequency indicators suggest continued expansion, but risks are emerging. The West Asia conflict could raise input costs and disrupt supply chains, potentially affecting industries and agriculture. The central bank also warned that elevated crude oil prices may increase imported inflation and widen the current account deficit. Despite these concerns, the RBI expressed confidence that India remains better positioned to handle global shocks compared to previous crises.

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