RBI to Hold Repo Rate at 5.25% Until Mid-2027: Poll

Introduction

The Reserve Bank of India (RBI) is widely expected to maintain its key policy repo rate at 5.25% during its upcoming monetary policy meeting on April 8. A recent Reuters poll of economists suggests this pause could extend until at least the middle of 2027. This decision is supported by a stable economic environment where inflation remains under control and growth is robust, giving the Monetary Policy Committee (MPC) the flexibility to adopt a 'wait and watch' approach amidst global uncertainties.

Strong Consensus Among Economists

The expectation for a rate hold is backed by a strong consensus in the financial community. In a Reuters poll conducted between March 23-26, an overwhelming majority of participants, 69 out of 71 economists, forecasted that the RBI would keep the repo rate unchanged at 5.25%. This sentiment has remained consistent with previous surveys, indicating a firm belief that the central bank will continue its current policy stance for an extended period. The stability in these forecasts underscores the market's confidence in the RBI's current strategy.

Inflation Remains Within a Benign Range

A key factor enabling the RBI to maintain the status quo is the manageable inflation level. For the past year, headline inflation has consistently stayed below the central bank's medium-term target of 4%. While survey projections indicate an average inflation rate of 4.3% over the next two fiscal years, this is considered a benign level that does not necessitate immediate policy tightening. Sakshi Gupta, a principal economist at HDFC Bank, noted that it is "premature to be considering a rate increase," a view shared by many of her peers. This controlled price environment provides the MPC with valuable room to assess economic data without pressure to act.

Robust Economic Growth Provides Cushion

India's strong economic performance provides another pillar of support for the current policy stance. The economy is projected to grow at a steady rate of around 7.0%. Reinforcing this positive outlook, the RBI recently revised its own growth forecast for the 2026 fiscal year upwards to 7.4%. This vigorous growth momentum means the economy does not require monetary stimulus through rate cuts, allowing the central bank to focus on its primary mandate of price stability.

Navigating Global Uncertainties

Despite the positive domestic picture, the RBI remains cautious due to external risks. The ongoing conflict in the Middle East poses a significant threat to global supply chains and energy prices. As one of the world's largest oil importers, India is particularly vulnerable to fluctuations in crude oil prices. Abhishek Upadhyay, a senior economist at ICICI Securities Primary Dealership, cautioned that it is important for the RBI to not sound "complacent or dovish" and to remain mindful of potential inflation risks stemming from these global developments.

The MPC's Neutral Stance and Policy History

The MPC has officially maintained a "neutral" stance since June, signaling that future rate movements could go in either direction depending on evolving economic conditions. The current pause follows a period of monetary easing that began in February 2025, during which the RBI implemented a cumulative 125 basis points in rate cuts to support growth. The most recent adjustment was a 25 basis point cut in December 2025. The decision to now hold rates steady reflects a shift from active stimulus to a more observational phase.

Key RBI Policy Rates at a Glance

To provide clarity, the current policy rates set by the RBI are summarized below. The repo rate is the primary tool, with other rates aligned around it.

Market Outlook and Forward Guidance

Looking ahead, the market does not anticipate any change in the policy rate in the near future. The MPC has reiterated its commitment to achieving the 4% headline inflation target on a durable basis. The prevailing sentiment is that the committee will continue to monitor incoming data on both domestic and global fronts before making any decisive moves. While the policy rate is expected to remain unchanged, the governor's forward guidance may retain a mildly dovish tone, acknowledging that the path of future policy will be data-dependent.

Conclusion

In summary, the Reserve Bank of India is positioned to maintain its policy repo rate at 5.25% in the upcoming review and likely for the foreseeable future. This steady approach is justified by a favorable combination of strong GDP growth and controlled inflation. However, the central bank remains vigilant, with a close watch on geopolitical risks that could impact the economic outlook. The April 8 policy announcement is expected to confirm this status quo, with market participants focusing on the RBI's commentary for insights into its long-term strategy.