The Reserve Bank of India kept the repo rate unchanged at 5.50% in its latest monetary policy decision, matching the consensus estimate. This move follows the previous hike that brought rates to this level from 5.25%.

Policy stance remains on calibrated tightening

The Monetary Policy Committee retained its stance of calibrated tightening. This decision signals continued vigilance against inflationary pressures, consistent with the shift announced in the October meeting. The central bank continues to prioritize price stability while supporting growth.

The RBI’s inflation outlook remains cautious, with the FY27 core inflation forecast held at 4.4%, revised up from the previous estimate of 4.3% in the prior cycle. This projection underpins the rationale for maintaining a restrictive policy posture.

Focus on headline inflation convergence

The RBI stated it will continue to focus on bringing headline inflation to the 4% target. This reaffirmation underscores the central bank's commitment to anchoring inflation expectations around the mandated goal, despite the upward revision in core inflation forecasts.

What the Numbers Show

The decision to hold rates at 5.50% aligns with market expectations, indicating that the previous 25 bps hike was sufficient to anchor inflation expectations in the short term. The retention of the calibrated tightening stance, coupled with the upward revision of the FY27 core inflation forecast to 4.4%, suggests that the RBI is not yet ready to pivot toward easing. The gap between the current rate and the estimated neutral rate remains a key focus for future policy calibration.

The Reserve Bank of India has revised its crude oil price forecast upward to $95 per barrel for H2FY27, compared to $85 per barrel projected for H1FY27.

Forecast revision at a glance

The revision marks a $10 per barrel increase in the central bank's crude oil price assumption between the two halves of FY27. The table below captures the forecast comparison across the two periods.

Crude oil prices are a key input variable in macroeconomic assessments, influencing inflation projections, current account estimates, and fiscal calculations. The RBI's upward revision for H2FY27 reflects a higher energy cost assumption for the latter half of the fiscal year.