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The Reserve Bank of India (RBI) is expected to keep the repo rate unchanged at 5.25 per cent through the remainder of 2026, with economists increasingly betting that slowing economic growth will outweigh concerns over rising inflation and a weakening rupee, according to a Reuters poll.
The July 21-27 Reuters survey found that 68 of 72 economists expect the Monetary Policy Committee (MPC) to leave interest rates unchanged at its August 3-5 policy meeting. The poll also indicates that the repo rate is likely to remain on hold until at least early 2027, marking a shift from expectations in May when economists had projected a rate hike later this year.
The RBI has maintained the policy rate at 5.25 per cent since cutting it by 25 basis points in December. While retail inflation accelerated to 4.38 per cent in June, crossing the central bank’s 4 per cent target for the first time since January 2025, economists believe policymakers are unlikely to react to what they see as temporary price pressures.
The cautious outlook gained further support after RBI Governor Sanjay Malhotra recently said it was “premature” to discuss raising interest rates.
Economists believe the central bank is balancing multiple external risks, including the economic fallout from the ongoing Middle East conflict and higher US tariffs, both of which could weigh on domestic growth.
“The RBI is unlikely to rush into tightening monetary policy as growth risks remain elevated and the global environment continues to be uncertain,” economists surveyed by Reuters said.
Several analysts also argued that the central bank would prefer to assess whether recent inflationary pressures become persistent before considering any policy tightening. Some warned that a sustained rise in crude oil prices above USD 90 per barrel could prompt a rate increase in the second half of the financial year.
Despite the rupee depreciating nearly 7 per cent against the US dollar this year, economists do not expect the RBI to deploy interest rate hikes to defend the currency. Instead, they believe the central bank will continue relying on liquidity measures and capital inflow initiatives while keeping its focus on supporting economic growth.
India’s economy is projected to expand by 6.6 per cent this financial year, slower than the 7.7 per cent recorded last year, reinforcing the argument for maintaining an accommodative policy stance.
According to the Reuters poll, inflation is expected to average 4.8 per cent in FY27, marginally higher than estimates in May but still below the RBI’s own projection of 5.1 per cent, giving policymakers room to maintain their wait-and-watch approach unless inflation moves decisively above the tolerance band.
