RBI Hits Pause on Rate Cuts, Citing Uncertainties

FY26 Inflation Forecast Slashed to 3.1% From 3.7%

- MANOJIT SAHA

Amid uncertainties over US tariffs on Indian goods exports and volatile food prices, the six-member rate setting panel of the Reserve Bank of India (RBI) unanimously decided to keep the policy repo rate unchanged at 5.5 per cent while maintaining a neutral monetary stance.

The central bank also cut the inflation outlook for the current financial year by 60 basis points (bps) to 3.1 per cent, which is significantly below its mandated target of 4 per cent. However, headline inflation for the April-June quarter (Q1) of the next financial year 2026-27 (FY27) is projected at 4.9 per cent. The FY26 GDP growth projection was left unchanged at 6.5 per cent, with Q1 FY27 growth pegged at 6.6 per cent.

"Headline inflation is much lower than projected earlier; it is mainly due to volatile food prices, especially of vegetables," RBI governor Sanjay Malhotra said while announcing the decision of the monetary policy committee (MPC).