RBI Monetary Policy: Repo Rate Held at 5.25% Amid Inflation Caution

The Reserve Bank of India (RBI) maintained the repo rate at 5.25% in its February 2026 policy meeting. Governor Sanjay Malhotra cited revised inflation projections for FY27 as a reason for the pause, following 125 basis points of cuts in 2025.

25% during its February 2026 review meeting. This decision marks a pause after a significant easing cycle in 2025, where the central bank reduced rates by a cumulative 125 basis points to support economic momentum. RBI Governor Sanjay Malhotra stated that while the growth outlook remains strong, the committee chose to remain vigilant regarding inflationary pressures emerging in the upcoming fiscal year.

Status Quo on Interest Rates

25% comes after a series of reductions throughout the previous calendar year. 25%. 25%. By holding the rates steady now, the MPC aims to assess the transmission of previous cuts into the broader economy before committing to further adjustments.

Revised Inflation Projections for FY27

A key highlight of the policy announcement was the upward revision of inflation forecasts for the financial year 2026-27 (FY27). 2% for Q2 FY27. These figures suggest a slight departure from earlier expectations of a more rapid decline in price levels, while 2%. The Governor noted that while most commodity prices are stable, volatility in global precious metal prices remains a factor to monitor.

Economic Growth and Policy Stance

Governor Malhotra emphasized that the Indian economy continues to show resilience, with a positive growth outlook supported by recent investment deals and industrial activity. The RBI's stance remains focused on the withdrawal of accommodation to ensure that inflation aligns with the target on a durable basis, while the repo rate, which is the rate at which the central bank lends to commercial banks, directly influences lending and deposit rates across the country. The current pause implies that home and auto loan EMIs are unlikely to see an immediate reduction.

Analytical Perspective on RBI Decision

According to financial analysts, the RBI's cautious approach is driven by the need to anchor inflation expectations amidst global economic uncertainties. Analysts suggest that the central bank is prioritizing price stability over further monetary easing, especially as food price volatility remains a potential risk. The next comprehensive update on the Consumer Price Index (CPI) inflation projections is expected in the April 2026 policy statement, which will incorporate fresh data from the new series of economic indicators.