RBI Holds Rates Steady, Signals Cautious Optimism Amid Global Uncertainty

The Reserve Bank of India’s Monetary Policy Committee (MPC) concluded its bi-monthly meeting with no surprises, keeping the benchmark repo rate unchanged at 6.50% for the fifth consecutive time. While the decision was widely anticipated by markets, the tone of the central bank struck a careful balance between caution and confidence as it navigates a complex global landscape.

RBI Governor Shaktikanta Das announced that the committee voted by a 5:1 majority to maintain the status quo on interest rates, highlighting that inflation remains a concern even as growth continues to hold steady. The central bank projected the GDP growth for FY26 at 7.0%, reaffirming its belief in the strength of domestic demand, investment momentum, and the resilience of the services sector.

However, inflation — particularly in food prices — continues to cast a shadow. The RBI revised its CPI inflation forecast slightly upward to 5.4% from the earlier estimate of 5.2%. Governor Das noted that unseasonal rains, global supply chain uncertainties, and commodity price volatility could push prices higher, and warned that the central bank would remain "highly alert" to evolving risks.

The RBI also hinted at gradually withdrawing surplus liquidity from the banking system, signalling a tighter liquidity environment in the coming months. Although the broader financial system is flush with funds, the central bank has already been conducting variable rate reverse repo auctions to manage excess liquidity.

Despite rising calls from industry leaders to reduce rates and boost credit flow, the RBI stuck to its stance of "withdrawal of accommodation", making it clear that rate cuts are not on the table for now. Governor Das reiterated that acting prematurely could reverse the hard-won gains in the fight against inflation.

Acknowledging global uncertainties, the RBI flagged geopolitical tensions, unstable commodity markets, and unpredictable interest rate movements in major economies as key risks to monitor.

As things stand, the RBI appears content with its current policy mix. With inflation not fully under control and growth holding strong, the central bank is likely to keep watching from the sidelines — at least until October, when the next policy review is due.