RBI holds policy rates while raising growth forecast; cuts inflation projections - The Economic Times Benchmarks
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News›News›Economy›Policy›RBI holds policy rates while raising growth forecast; cuts
inflation projections The Economic Times daily newspaper is available online now. Read Today's Paper RBI holds policy
rates while raising growth forecast; cuts inflation projectionsSECTIONSRBI holds policy rates while raising growth
forecast; cuts inflation projectionsBy Joel Rebello & Rozebud Gonsalves, ET BureauLast Updated: Aug 05, 2026,
12:47:00 PM ISTRate StoryFollow usShareFont SizeAbcSmallAbcMediumAbcLargeSavePrintCommentSynopsisThe Reserve Bank of
India maintained its benchmark repo rate at 5.25 percent. Inflationary expectations were lowered to 5 percent for fiscal
year 2027. Growth projections were raised to 6.7 percent, anticipating economic momentum. Geopolitical uncertainty and
monsoon patterns pose potential risks to the outlook. The central bank remains committed to price and financial system
stability.RBI governor Sanjay MalhotraThe central bank Wednesday unanimously decided to keep the benchmark repo rate
unchanged at 5.25% for the fourth consecutive review and retained a neutral stance, while simultaneously lowering
inflationary expectations and raising fiscal-year growth projections to an equal extent.Reserve Bank of India (RBI)
Governor Sanjay Malhotra, while announcing the unanimous monetary policy committee (MPC) decision on rates, noted that
the current risks to inflation remain primarily a function of supply-side constraints and are not broad based.The RBI
eased its FY27 forecast for consumer price inflation to 5%, down from the 5.1% projected in June, and raised full-year
growth projections to 6.7% from 6.6%, anticipating front-loaded economic momentum.At the same time, Governor Malhotra
underscored risks stemming from geopolitical uncertainty and patchy monsoons, even though immediate odds seem rather
long on a broad-based pricing spiral.“Although generalised inflation pressures continue to remain modest so far, the
risks of second-round impact of higher food, fuel and other input prices translating to broad-based inflation
persist,” Malhotra said.Live EventsThe policy decision was in line with market expectations. An ET poll of 12
economists, published on August 3, showed participants expected the RBI to maintain a status quo on rates and a neutral
stance.Lower inflation expectations come amid a rapid retreat in oil prices below $80 a barrel.Inflation, GrowthThe RBI
now pegs second quarter inflation at 4.7%, down from the 5.1% projected earlier. It raised growth projections on a
likely strong showing in the first and second quarters. Growth is expected to be better at 7% in the first quarter ended
June versus 6.6% projected earlier and at 6.4% in the second quarter ended September from 6.3% projected earlier.Also
read | RBI's rate, GDP and inflation verdicts come with stark warningsSustained momentum in services, continuing impact
of GST rationalisation, and broadly stable employment conditions should continue to support urban demand. Strong
capacity utilisation, robust credit flow and the government’s continued thrust on infrastructure are expected to
sustain investment activity.Yields on the 10-year benchmark government bond rallied four basis points, and were at
6.77%, versus the previous close of 6.81%.One basis point is a hundredth of a percentage point.Equity markets were
little changed after the policy announcement. The Nifty was up 0.15% at 24,653, while the BSE Sensex was up 0.50% to
78,882. The Indian rupee rose to its highest level in a month on Wednesday, opening at 95.08, versus its previous close
of 95.37 per dollar.The MPC said a turbulent global economic environment is likely to have some bearing on domestic
economic activity.Potential Risks“Energy prices and supply chain pressures remain elevated and uncertain. The adverse
impact is being contained with various supply side measures,” the committee said. “Even though the situation is
still evolving, deficient and uneven south-west monsoon amidst El Niño conditions poses some risks to the agriculture
sector’s outlook and rural demand.”Malhotra said moderation in global trade growth, surge in energy prices and
persistent trade policy uncertainties pose upside risks to India’s current account deficit in 2026-27.“On the other
hand, implementation of the India-UK trade deal along with other recent agreements with major trading partners, healthy
services exports and buoyant inward remittances are expected to mitigate these risks,” he said.Malhotra said global
economic conditions and sentiments continue to remain hostage to the rapidly oscillating developments of the West Asia
conflict but the stronger macroeconomic fundamentals of the Indian economy are helping navigate this global shock
resolutely.“We shall continue to implement policies that further fortify our economy. Whether it is facilitating
sustainable growth or promoting consumer protection; whether it is preserving stability of prices, the financial system
or the currency, we will do whatever it takes to ensure the same,” Malhotra said.Add as a Reliable and Trusted News
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