![\"US-Iran](\"https:\/\/static.toiimg.com\/thumb\/msid-132896181,imgsize-667086,width-400,height-225,resizemode-4\/rbi-mpc.jpg\" "\\"RBI")
<\/div>\n<\/div>\n<\/div>\nRBI\u2019s monetary policy in August comes against a backdrop of rising global inflation and central banks raising rates to keep it in check. Yet, RBI governor<\/a> Sanjay Malhotra-led Monetary Policy Committee on Wednesday decided to keep the repo rate<\/a> unchanged at 5.25%.\u201cAfter conducting a comprehensive review of the evolving macroeconomic and financial conditions, along with the broader outlook, the Monetary Policy Committee unanimously decided to leave the policy repo rate under the Liquidity Adjustment Facility unchanged at 5.25%,\u201d RBI governor Sanjay Malhotra said in his policy statement. The MPC also unanimously resolved to retain its neutral policy stance.The US-Iran conflict has unleashed a crude oil supply chain disruption since March, and the global economy is still reeling from its uncertainty. Last week the US Federal Reserve also opted to keep interest rates unchanged, even as voices within the central bank are now supporting a rate hike to keep inflation in check.Also Check | RBI MPC Meet Live Updates<\/a>Indeed, RBI governor Sanjay Malhotra has acknowledged that the conflict in West Asia continues to weigh on the global economy by disrupting critical trade routes and supply chains, increasing market volatility and weakening business confidence.\u201cTrade-related uncertainty has also persisted following the imposition of fresh tariffs by the United States. As a result, the global economic outlook has become more uncertain, with growth expected to moderate and inflation projected to be higher in 2026 than previously anticipated. While some central banks have tightened monetary policy, others continue to remain cautious. Crude oil prices, currency markets and financial markets have remained highly volatile, responding to changing developments and uncertainties surrounding the West Asia conflict,\u201d he said at the start of his policy statement.Amid this global turmoil, RBI decided not to hike the repo rate, and the policy statement clearly explains the rationale. Let\u2019s take a look:<\/p>\n The biggest factor was that while inflation has risen, the impact of cost pressures has not been widespread.The MPC observed that headline Consumer Price Index (CPI) inflation rose above the target in line with expectations. However, inflation during the first quarter came in slightly below RBI\u2019s projections, indicating that the transmission of higher input costs to consumer prices remained limited.\u201cThe higher inflation is mostly on account of fuel and food with little signs of generalisation of price pressures so far,\u201d said Malhotra.Core inflation, excluding precious metals, has continued to remain subdued. RBI expects the headline inflation to rise further over the coming months and likely peak in the third quarter of FY27, mainly because of food and fuel prices, before easing thereafter.In fact, RBI has lowered its inflation forecast for the current financial year from 5.1% to 5%.Growth also continues to be robust. Economic activity continues to be underpinned by strong domestic demand, steady expansion in the manufacturing and services sectors, and healthy export performance, reinforcing India’s status as the world’s fastest-growing major economy.RBI has raised the GDP growth forecast from 6.6% to 6.7% for the current financial year.\u201cTo sum up, even though headline inflation is projected to increase, it is primarily on account of supply side pressures caused by food and fuel; it is not getting broadbased; core inflation remains moderate and is expected to decline after peaking in Q3,\u201d said Malhotra.He stressed on the need for greater clarity to emerge on the impact of El Nino and the West Asia conflict.\u201cGrowth, albeit resilient, is expected to be lower in 2026-27. The outlook, however, is hazy because of the uncertainties regarding south-west monsoon, El Nino, geopolitics and global trade policy. There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action,\u201d he said.<\/span>\u201cAny such action would also have to consider the need for recalibration of policy rates in line with the evolving growth-inflation dynamics, especially the normalisation of the underlying inflation from its benign levels seen hitherto. Considering all these factors, the MPC voted to keep the policy rate unchanged. The MPC also decided to retain the neutral stance to respond appropriately to macroeconomic developments.<\/span> The MPC underscored that it will maintain a close vigil and remain resolute in its commitment to align inflation with the target,\u201d he concluded.<\/span><\/div>\nWhy RBI kept repo rate unchanged<\/h2>\n<\/p>\n