RBI Policy Update August 2026: Repo Rate Unchanged at 5.25%, FY27 GDP Growth Raised to 6.7%, Inflation Forecast Cut

5 Aug 2026 , 12:48 PM

The Reserve Bank of India (RBI) kept the benchmark repo rate unchanged at 5.25% in its Monetary Policy Committee (MPC) meeting on August 5, 2026, while maintaining a ‘Neutral’ policy stance. The unanimous decision reflects the central bank’s cautious approach amid global geopolitical uncertainties, even as India’s domestic economy continues to demonstrate resilience.

The RBI also upgraded its FY27 GDP growth outlook while lowering its inflation forecast, reinforcing confidence in the country’s economic fundamentals despite external risks.

RBI Keeps Repo Rate Unchanged

The six-member Monetary Policy Committee unanimously voted to keep key policy rates unchanged.

The latest policy rates are:

• Repo Rate: 5.25%
• Standing Deposit Facility (SDF): 5.00%
• Marginal Standing Facility (MSF): 5.50%
• Bank Rate: 5.50%

The RBI retained its Neutral monetary policy stance, indicating that future policy actions will remain data-dependent while balancing inflation control and economic growth.

Why RBI Held Interest Rates Steady

The central bank cited heightened global uncertainties, particularly geopolitical tensions in the Middle East, as a key reason for maintaining the current policy stance.

At the same time, the RBI observed that India’s economic activity has remained stronger than expected, supported by healthy domestic demand, improving manufacturing activity, and resilient private consumption.

The central bank noted that discretionary consumer spending continues to support economic momentum despite global headwinds.

RBI Raises FY27 GDP Growth Forecast

Reflecting stronger-than-expected economic performance during the first quarter, the RBI revised its FY27 GDP growth forecast upward to 6.7%, compared with the earlier estimate of 6.6%.

Updated FY27 GDP Projections

Quarter	Latest Forecast	Previous Forecast
Q1 FY27	7.0%	6.6%
Q2 FY27	6.4%	6.3%
Q3 FY27	6.5%	6.5%
Q4 FY27	6.8%	6.8%
Full Year FY27	6.7%	6.6%

The RBI said the Indian economy delivered better-than-expected growth during the first quarter, supported by robust manufacturing output and sustained domestic demand.

RBI Lowers FY27 Inflation Forecast

The central bank also revised its inflation outlook, lowering the FY27 Consumer Price Index (CPI) inflation forecast to 5.0%, compared with the earlier estimate of 5.1%.

Updated Inflation Forecast

Quarter	Latest Forecast	Previous Forecast
Q1 FY27	4.1%	4.2%
Q2 FY27	4.7%	5.1%
Q3 FY27	5.9%	5.9%
Q4 FY27	5.5%	5.4%
Full Year FY27	5.0%	5.1%

The revised projections reflect easing inflationary pressures, although the RBI continues to monitor risks arising from global commodity prices and geopolitical developments.

RBI Governor Highlights Key Economic Risks

During the policy announcement, the RBI Governor highlighted that the ongoing US-Iran conflict continues to create uncertainty in global energy markets, leading to fluctuations in crude oil prices.

The Governor also emphasized:

• Manufacturing recorded a healthy performance during Q1 FY27.
• Private consumption remains robust, driven by discretionary spending.
• India’s economic growth has exceeded earlier expectations.
• Global uncertainties continue to warrant caution despite positive domestic indicators.

Rupee Strengthens as Dollar Weakens

Following the RBI policy announcement, the Indian rupee appreciated sharply in early trade.

• Rupee: 94.89 per US dollar (up 39 paise)
• Previous Close: 95.28/USD
• US Dollar Index: 99.80, down 0.06%

The stronger rupee was supported by a softer US dollar and easing crude oil prices.

Brent Crude Declines

Global oil prices remained under pressure.

• Brent Crude: USD 78.48 per barrel
• Change: Down 1.11%

The decline came after signs of progress in US-Iran diplomatic talks, easing concerns over immediate supply disruptions.

Stock Market Reacts to RBI Policy

Indian equity markets traded mixed following the RBI’s monetary policy announcement.

As of 12:45 PM:

• Nifty 50: 24,544.15, down 80 points (-0.33%)
• Sensex: 78,436.14, up 10 points (+0.01%)

Market participants continued to assess the impact of the RBI’s policy decision alongside geopolitical developments, currency movements, and global commodity prices.

FIIs Continue Buying Indian Equities

Foreign Institutional Investors (FIIs) remained net buyers in the Indian equity market, purchasing shares worth ₹2,446.47 crore on Tuesday.

The sustained FII inflows indicate continued confidence in India’s macroeconomic outlook despite ongoing global uncertainties.

Outlook

The RBI’s latest monetary policy strikes a balance between supporting economic growth and maintaining vigilance on inflation. While stronger GDP projections reflect confidence in domestic demand and manufacturing activity, the central bank remains cautious due to geopolitical tensions and volatile energy prices.

Going forward, investors will closely track inflation trends, crude oil prices, global developments, currency movements, and upcoming macroeconomic data to assess the timing of the RBI’s next policy move.

 

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