The Monetary Policy Committee kept the repo rate at 5.25% on August 5, unanimously. It nudged its growth forecast up to 6.7%, kept inflation at about 5% for the year, and flagged a likely peak near 5.9% this winter.
On August 5, the RBI did what it has done at every meeting this year: it held the repo rate at 5.25%, with all six members of the Monetary Policy Committee in favour and the stance still neutral. It nudged its growth forecast for 2026-27 up to 6.7%, from 6.6%, and trimmed its full-year inflation forecast to 5.0%. Read quickly, it sounded like steady news. The detail was more worried: the RBI expects inflation to peak near 5.9% in the October to December quarter.
Supply, not demand
The RBI’s argument for holding rather than hiking rests on the source of inflation. It described current price pressures as largely supply-driven: expensive oil from the war and expensive food from a weak monsoon. That is a supply shock, and raising interest rates does not grow more onions or reopen a shipping lane. Rate hikes work by cooling demand, and the RBI judged that demand was not the problem.
A central bank can slow how much people want to buy. It cannot change how much there is to buy.
The risk list
The RBI listed the risks plainly: volatile oil prices, geopolitical tension, uncertain global trade policy, the south-west monsoon and El Niño. The worry is that a supply shock does not stay a supply shock forever. If high food and fuel prices persist long enough, workers demand higher wages and businesses raise prices pre-emptively, and inflation becomes broad-based. That is the point at which central banks stop waiting. The next meeting is October 5 to 7, and the RBI has made clear that it is watching for exactly that shift.
Sources: RBI Monetary Policy Statement, August 5, 2026.
- The RBI held the repo rate at 5.25% on August 5, its fifth straight hold.
- It raised its 2026-27 growth forecast to 6.7% and kept inflation near 5%.
- Inflation is expected to peak around 5.9% in the October–December quarter.
- The RBI described current inflation as mainly supply-driven, not broad-based.
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