As expected, the RBI’s Monetary Policy Committee kept the repo rate unchanged at 5.25% at its scheduled policy review meeting today, while retaining its ‘neutral’ policy stance.
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In line with expectations, the RBI’s Monetary Policy Committee kept the repo rate unchanged at 5.25% at its scheduled policy review meeting today, while retaining its ‘neutral’ policy stance. The central bank aligned its FY26 GDP growth forecast with NSO’s estimate of 7.4%, while revising up its CPI inflation forecast by 10 bps to 2.1%. For H1 FY27, the RBI projects GDP growth and CPI inflation at 7.0% and 4.1%, respectively. The projection of a “Goldilocks” economic scenario backed by the belief that trade-related volatility for India would start to fade in FY27 makes us believe that monetary policy is in for an extended pause. Having said, we continue to expect the RBI to play a supportive role via active infusion of primary liquidity. We expect policy tools like Operation Twist and Buybacks to get deployed in addition to OMO purchases to mitigate supply concerns in the bond market. We retain our call of the 10Y g-sec yield at 6.75% and 6.90% for Mar-26 and Mar-27, respectively.