RBI MPC Highlights: ‘Neither dovish nor hawkish- this is the right policy rate,’ says RBI Governor

Indranil Pan, Chief Economist at Yes Bank, said that while the RBI has made small changes to its growth and inflation forecasts, these should not be interpreted too deeply as they merely reflect the actual data flow in Q1FY27.

"I think there is no clear forward guidance, and rightly so, as there are many moving parts, particularly related to the geopolitics in West Asia. With oil, currency and other commodity prices remaining volatile globally, and El Niño risks persisting domestically, inflation risks remain. Having said that, in the immediate term, these inflation risks are yet to play out, including the muted pass-through of cost pressures," Pan said.

"We think the RBI will be willing to hold back on raising rates for as long as possible, as any pre-emptive hike could dent growth," he added.

Brajesh Kumar, MD & CEO of Canara Bank said that RBI rate pause decision is not surprising for them as retail inflation has still not crossed the 6% upper band. Brent crude falling below 80 per barrel is an added comfort. "The 10 bps reduction in FY27 retail inflation forecast to 5% is attributable to lower crude.

"The neutral policy stance, however, leaves room for a move in either direction in the ensuing policies depending on incoming data. Since economic growth is an important consideration at this juncture, a pause makes sense as rate hikes could strain consumption and growth. Overall, the MPC tone strikes a fine balance between growth-inflation dynamics while stressing future decisions to be data dependent," Canara Bank CEO added.

Shekhar Patel, President, CREDAI , said RBI's decision to maintain the repo rate at 5.25% provides much-needed stability and reassurance for the real estate sector.

"Despite supply-side disruptions in recent months due to the situation in West Asia, the housing market has continued to demonstrate remarkable resilience, reflecting strong underlying demand. Stable borrowing costs further support this momentum by providing financing certainty and facilitating timely project execution. Going forward, continued investment in infrastructure, coupled with stronger policy support for affordable housing, will further strengthen the sector's long-term growth trajectory. Policy stability instils confidence across the housing ecosystem and is particularly significant for an industry where investment and homeownership decisions are made with a long-term perspective," Patel said.

"Amidst considerable volatility engendered by geopolitics and the monsoon, the Committee’s growth and inflation forecast were tweaked marginally, and we believe that these are appropriate for an average crude oil price of $80-85/barrel and a moderate rainfall deficit. Importantly, the tone of the policy statement was relatively neutral, and does not suggest that rate tightening is imminent," says Aditi Nayar, Chief Economist, ICRA.

RBI Governor says bulk deposit rate guidelines factor in the varying cost of deposits across different customer segments.

"The rupee has strengthened over the past few months, and we believe it could strengthen further as global tensions ease," says RBI Governor Sanjay Malhotra

"No proposal under consideration to close FCNRB scheme prematurely," says RBI Governor Sanjay Malhotra while addressing the press conference after the MPC meeting.

"We are neither hawkish nor dovish. This is the right policy rate," RBI Governor Sanjay Malhotra said while addressing the press conference after the MPC meeting.

"Our endeavor is to bring inflation In-line with target in the medium term... Framework is clear, Our target is headline not core inflation," Governor Malhotra added.

"The policy tone is cautious albeit constructive, balancing uncertainties from the ME conflict, tighter global financial conditions, and El Niño risks against resilient domestic growth and robust FCNR+ inflows," Madhavi Arora, Chief Economist, Emkay Global Financial Services said.

she noted that despite Q1 inflation undershooting RBI's forecast, the MPC has retained its emphasis on El Niño risks, while reiterating that any near-term price pressures would largely be supply-driven unless they broaden into second-round inflation effects for monetary policy to act.

Ajit Mishra – SVP, Research, Religare Broking explained that the "RBI's decision to maintain the repo rate at 5.25% while retaining a neutral policy stance reflects a balanced and forward-looking approach to monetary policy. Although domestic macroeconomic fundamentals remain resilient and inflationary pressures are relatively contained, persistent global uncertainties, commodity price volatility and geopolitical risks warrant a cautious stance."

According to hm, "By preserving policy flexibility, the MPC has struck the right balance between supporting economic growth and maintaining price stability. The emphasis on a data-dependent policy framework provides the RBI with the necessary room to respond proactively to evolving domestic and global macroeconomic conditions, reinforcing confidence in India's macroeconomic and financial stability."

RBI Governor Sanjay Malhotra also said that the prospects for agriculture are clouded by deficient and uneven southwest monsoon amidst El Niño conditions.

According to Dnyanada Vaidya, Research Analyst - BFSI, Axis Direct, "The RBI’s decision to maintain the repo rate while keeping its neutral stance was largely anticipated as inflationary pressures eased slightly and growth remained resilient. While oil prices have corrected, monsoon-related challenges remain a key risk for the inflation and are keenly eyed. The regulator has revised its inflation estimates marginally lower by to 5% vs 5.1% earlier, with core inflation revised downwards to 4.3% vs 4.7% earlier. Concurrently, growth estimates have been revised marginally higher to 6.7% for FY27 vs 6.6% earlier."

He added that "from a banking perspective, banks fared well in a seasonally weak Q1 with credit growth remaining strong and earnings remaining resilient, supported by well- contained credit costs and modest opex growth despite margin headwinds visible across most banks. Asset quality metrics holding up was the key positive during the quarter and improvement was visible across most lenders, led by controlled slippages."

Another highlight as per Vaidya "has been the strong FCNR(B) deposit mobilisation seen so far, which should support deposit growth in Q2. We expect margins to remain largely range-bound in the near-term and any improvement will be largely led by a favourable portfolio mix shift. We continue to favour banks with strong earnings growth visibility, healthy balance sheets and attractive valuations. Our preferred picks among banks are Kotak Mahindra Bank, ICICI Bank, SBI, Federal Bank and Ujjivan SFB, while we prefer Bajaj Finance, Shriram Finance and CreditAccess Grameen among NBFCs."

Global oil prices have remained highly volatile, with sharp two-way movements triggered by geopolitical developments. This has blurred the near-term outlook. Although broad-based inflationary pressures have remained modest so far, the risk of second-round effects from higher food, fuel, and other input prices translating into broad-based inflation persists.

RBI Governor Sanjay Malhotra noted that June inflation was higher primarily due to elevated food prices, fuel prices, and fuel-induced inflation.

Madhavi Arora, Chief Economist, Emkay Global Financial Services explained that "The policy tone is cautious albeit constructive, balancing uncertainties from the ME conflict, tighter global financial conditions, and El Niño risks against resilient domestic growth and robust FCNR+ inflows. Despite 1Q inflation undershooting RBI's forecast, the MPC has retained its emphasis on El Niño risks, while reiterating that any near-term price pressures would largely be supply-driven unless they broaden into second-round inflation effects for monetary policy to act."

"Credit growth remains robust, broad-based; central bank will ensure sufficient liquidity in system, says RBI Governor Sanjay Malhotra.

'Moderation in global trade, surge in energy prices, persistent trade policy uncertainties upside risks to India's Current Account Deficit,' RBI Governor Sanjay Malhotra said.

The Liquidity Adjustment Facility (LAF) registered an average daily surplus of Rs 1 lakh crore since the last MPC meeting.

FY27 CPI inflation projection has been reduced 5% from 5.1% earlier.

Q1: 5.3%

Q2: 4.7% Vs 5.1%

Q3: 5.9% unchanged

Q4: 5.5% Vs 5.4%

FY27: 6.7% Vs 6.6%

Q1: 7% Vs 6.6%

Q2: 6.4% Vs 6.3%

Q3: 6.5% unchanged

Q4: 6.8% unchanged

RBI Governor Sanjay Malhotra raised the real GDP growth outlook for FY27 to 6.7%, up 10 bps from the previous projection.

MSF rates maintained at 5.50% and SDF rates maintained at 5%, RBI announced on Wednesday.

The manufacturing sector may face cost pressures, but the growing diversification of global supply chains should help mitigate the impact. The services sector is expected to maintain its buoyancy.

"The outlook is hazy due to geopolitical tensions, El Niño, and global trade policy," RBI Governor Sanjay Malhotra said while announcing the key policy decisions.

RBI MPC unanimously decided to keep the policy repo rate unchanged at 5.25%. The MPC decided to maintain 'neutral' stance.

RBI Governor Sanjay Malhotra has begun speaking and will soon announce the key policy decisions taken unanimously by the Monetary Policy Committee (MPC).

Before this, the bimonthly monetary policy meeting was held in June, in which governor Sanjay Malhotra announced the MPC's unanimous decision to keep the policy repo rate unchanged at 5.25% while retaining the neutral policy stance. The repo rate was last reduced by 25 basis points, from 5.50% to 5.25%, in December 2025.

While the RBI is expected to stay on hold this month, economists expect the MPC to resume rate hikes later this year as inflation is projected to remain above 5% from October onwards for the following eight months.

"That's a level that will be difficult for both the RBI and markets to overlook. In that context, the RBI is likely to raise rates within this calendar year," HSBC said.

"We forecast 25 bps rate hikes in both October and December, taking the repo rate to 5.75% by the end of 2026 from the current 5.25%. We also think the window for rate hikes may close in early 2027 as the impact of El Niño on growth becomes clearer (weather agencies are calling for a 'very strong' El Niño in Q4 2026). That makes the October and December rate hikes important for reinforcing macroeconomic stability," HSBC noted.

Read more- RBI Monetary Policy Meeting: HSBC, Emkay predict rate pause as $41 billion FX inflows support growth

“MPC is expected to continue with a wait and watch, data-driven approach. While we don't expect a rate action in this policy, rhetoric on inflation is likely to be hawkish given El Nino risks and tensions in the Middle East," said Churchil Bhatt, Senior Executive Vice President of Kotak Mahindra Life Insurance Company.

"While a stance change, in our view, is a low probability event, markets will keenly watch out for any signals on what the RBI plans to do with liquidity. The geopolitical situation is still fragile and with inflation under control, we do not expect the RBI to commit to a stance change just yet,” Bhatt noted.

Radhika Rao, Senior Economist & Executive Director at DBS Bank expects the central bank to strike a cautious tone in its policy statement. "We anticipate a cautious policy statement that underscores the need for continued vigilance on the inflation outlook, while placing greater emphasis on core inflation as a more reliable measure of underlying price pressures rather than headline inflation, which has been influenced by both domestic and global supply-side factors," she said.

Economist at HSBC also doesn't forecast a rate hike at the August meeting. "The RBI may prefer to see firmer inflation prints before responding, and may also avoid making changes during the live FCNR(B) period," the HSBC noted

HSBC belives that India is in a sweet spot, but faces challenges that need to be addressed to preserve it."

RBI may focus on three priorities these three priorities- Inflation management, Liquidity management and Currency (rupee) stability, according to HSBC.