The Reserve Bank of India is expected to keep its benchmark repo rate unchanged at 5.25% in August and for the remainder of 2026, as concerns about weakening economic growth outweigh pressure from rising inflation.
A Reuters poll conducted from July 21 to July 27 found that 68 of 72 economists expected the central bank to maintain the current policy rate at its forthcoming meeting. Only four economists forecast a 25-basis-point increase.
The latest expectations represent a change from a Reuters poll conducted in May, when economists had predicted that the RBI could raise interest rates during the following quarter.
India’s retail inflation rose to 4.38% in June 2026, exceeding the RBI’s medium-term target of 4% for the first time since January 2025. Higher oil prices, currency weakness and uncertainty arising from the continuing Middle East conflict have increased concerns about future price pressures.
Despite the increase in inflation, economists believe the RBI will avoid tightening monetary policy prematurely. Higher interest rates could weaken borrowing, investment and consumer demand at a time when the economy is already facing external risks.
Economic growth is forecast to slow to approximately 6.6% during the current financial year, compared with 7.7% in the previous year. The expected slowdown gives the RBI an additional reason to maintain a supportive monetary stance.
The rupee’s recent weakness has also raised questions about whether the central bank may use interest rates to support the currency. However, analysts believe the RBI is more likely to rely on foreign-exchange intervention, liquidity management and measures designed to attract overseas capital rather than raising rates solely to defend the rupee.
Median forecasts from the poll indicate that the repo rate could remain unchanged until at least early 2027. Economists generally expect the RBI to consider an increase only when inflation remains persistently high or moves closer to the upper end of its tolerance range.
The central bank must therefore balance rising inflation and currency pressures against the risk that tighter monetary conditions could further weaken economic growth.
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