RBI to Keep Repo Rate Steady Through 2026 Amid Growth Concerns

The Reserve Bank of India (RBI) is expected to hold its benchmark repo rate at 5.25% through the end of 2026, according to a Reuters poll of 72 economists. A whopping 68 of them, roughly 95%, predict that the RBI will keep rates steady due to growth concerns outweighing inflation worries.

The RBI's cautious approach is driven by external uncertainties, including the Middle East conflict and surging oil prices. Governor Sanjay Malhotra has emphasized a data-driven approach, and the upcoming Monetary Policy Committee meeting on August 3-5 is expected to produce the same result as the previous two meetings.

The RBI has revised its economic forecasts for fiscal year 2027, with real GDP growth pegged at 6.6% and inflation projected at 5.1%. This reflects the drag from external shocks, particularly rising oil prices that hit India's current account hard due to its heavy reliance on imported crude oil.

The stable rate environment may have implications for markets, including the rupee, which faces pressure from rising oil prices. While there is no new regulatory framework signaling a change in the RBI's stance toward digital currencies, some investors may be drawn to alternative assets like crypto as a hedge against purchasing power erosion.