The Reserve Bank of India’s Monetary Policy Committee (MPC) concluded its February 2026 review by maintaining the repo rate unchanged at 5.25%, while revising its inflation outlook modestly upward. The RBI’s decision reflects shifting price pressures—especially in food and other consumer-facing sectors—alongside strong GDP growth that continues to support India’s economic recovery.
Repo Rate Decision: Holding Steady
At its meeting in early February, the RBI kept the key lending rate — the repo rate — unchanged at 5.25%. The decision, taken unanimously by the six-member MPC, was widely anticipated by analysts and markets given current inflation trends and robust growth dynamics. The monetary policy stance remains neutral, indicating no immediate shift toward tightening or easing.
Inflation Outlook Revised Upward
The central bank revised its inflation projections for the current and upcoming fiscal years. While inflation remains subdued in absolute terms, the MPC now projects higher price levels than its previous estimates as base effects fade and some price pressures re-emerge, especially from food, energy, and precious metals.
The revised projections include moderate increases in quarterly inflation estimates for the latter part of FY26 and early FY27. Though still close to the RBI’s medium-term target of 4%, these updated figures signal a shift from earlier expectations of prolonged disinflation.
Key Drivers Behind Inflation Change
• Food Price Dynamics: A resetting of food price weight in inflation calculations has contributed to a modest pickup in CPI inflation forecasts.
• Core Inflation Trends: Inflation excluding food and fuel remains generally well-contained, but recent data indicate gradual broadening of price pressures.
• Global Commodity Prices: Increases in gold, silver, and other commodities have added to upside risks on inflation estimates.
Growth Momentum Remains Strong
India’s economy continues to register high growth rates. The RBI’s own estimates place GDP growth around 7.4% for FY26, reflecting resilient domestic demand and strong performance in services and industrial sectors. Continued growth momentum supports the central bank’s decision to maintain the neutral policy stance.
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