The RBI’s Monetary Policy Committee unanimously held the repo rate at 5.25% and retained its neutral policy stance. The policy statement was balanced and more cautious than we had anticipated, signalling a continued wait-and-watch approach while preserving the option to recalibrate the policy rate as growth–inflation dynamics evolve.
The RBI raised its FY27 real GDP growth forecast by 10 bps to 6.7%, with risks evenly balanced, while trimming its CPI inflation forecast by 10 bps to 5.0%. Even so, headline CPI inflation is projected to hold above 5% from Q3 FY27 to Q1 FY28, pushing the estimated real policy rate into negative territory over these three quarters.
With economic growth resilient and upside risks to inflation persisting, we think the balance of considerations continues to favour monetary tightening. We therefore retain our call for cumulative policy repo rate hikes of 50–75 bps, though we now expect the cycle to begin in December 2026 or February 2027, later than previously anticipated.
