The Monetary Policy Committee (MPC) under the Reserve Bank of India (RBI) at its sixth and final bi-monthly monetary policy for the current fiscal (FY26) has unanimously decides to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25 per cent, citing positive inflation and growth outlook amid evolving economic conditions. Consequently, the standing deposit facility (SDF) rate remains at 5.00 per cent and the marginal standing facility (MSF) rate and the Bank Rate remains at 5.50 per cent. The MPC also decided to continue with the neutral stance.

On the inflation front, it said headline CPI inflation remained low at 0.7 per cent in November and 1.3 per cent in December, 2025. However, the central bank said geopolitical uncertainty coupled with volatility in energy prices and adverse weather events may pose a upside risk to inflation. Thus, it revised its inflation forecast for FY26 at 2.1 per cent from 2.0 per cent earlier. Looking ahead to the next financial year (FY27), the RBI projected inflation at 4 per cent for Q1:2026-27 and 4.2 per cent for Q2:2026-27, which are slightly higher than 3.9 per cent and 4.0 per cent, respectively, projected earlier. It said the outlook for CPI inflation in Q1:2026-27 and Q2:2026-27 continues to be benign and near the inflation target. The slight upward revision in the inflation outlook is primarily due to increase in prices of precious metals, which contribute about 60-70 basis points. 

On the economy front, it said India’s real gross domestic product (GDP), as per the First Advance Estimates (FAE), is estimated to grow at 7.4 per cent (y-o-y) in 2025-26. Private consumption and fixed investment contributed significantly to overall growth. Net external demand, however, continued to be a drag, with imports outpacing exports. On the supply side, real GVA growth of 7.3 per cent is driven by buoyant services sector, resilient agricultural sector and revival in manufacturing activity. Real GDP growth projections for Q1:2026-27 and Q2 are revised upwards to 6.9 per cent and 7.0 per cent, respectively.