RBI Holds Repo Rate at 5.25% Amid Inflation Risks

The RBI in June decided to keep the repo rate at 5.25% and maintain its neutral stance while warning of inflationary pressures. This was the central bank’s decision on June 5, 2026, to support growth and control global and domestic forces.

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Policy Highlights

The decision to keep the repo rate unchanged was unanimous at the Monetary Policy Committee (MPC). The SDF is still at 5.00% and the Marginal Standing Facility (MSF) and the Bank Rate are at 5.50%. The RBI said flexibility was a crucial factor to respond to inflation.

Inflation Risks

Governor Sanjay Malhotra explained the reasons for the cautious stance:

The increase in crude oil prices because of geopolitical tension in West Asia and the potential to push input costs higher.

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Rupee weakness, with the currency recently hitting record lows against the US dollar and adding to imported inflation.

Sectoral risk of global uncertainty, such as supply chain disruption and tightening policies in advanced economies.

The RBI raised its FY27 inflation projection to 5.1%, up from 4.6% in November and cut the GDP growth forecast to 6.6%.

Market Reaction

The policy clarity helped Indian stocks gain ground in the wake of policy clarity. Banking, financial, and interest-rate-sensitive stocks rallied, with the Sensex climbing 294 points to 74,654 and the Nifty 50 rising 77 points to 23,494. Investor sentiment improved as the status quo on rates provided stability for borrowers and businesses as a whole.

Global & Domestic Context

The RBI’s decision comes at a time of turbulent global markets. Central banks are tightening while a weak monsoon and higher input costs are hitting India. However, the manufacturing and services sector in the country is still robust enough to withstand external shocks.

By holding the repo rate at 5.25%, the RBI has shown patience in managing inflation risks while supporting growth. The neutral stance of policy is reassuring for the market, but the central bank is cognizant of global uncertainties, energy price shocks, and currency pressures. The next few months will demonstrate India’s resilience as policymakers have to balance growth ambitions with inflation control.