3 min readAug 6, 2026 06:00 AM IST First published on: Aug 6, 2026 at 06:00 AM ISTIn line with expectations, the RBI’ s monetary policy committee voted unanimously in its August meeting to keep interest rates unchanged. The repo rate stands at 5.25 per cent. Alongside, the committee chose to stay with its neutral stance. The rationale is straightforward. The uptick in inflation in recent months — CPI had risen to 4.38 per cent in June, from 3.93 per cent in May — is driven largely by food and fuel prices. Core inflation, excluding precious metals, remains subdued at around 2.3-2.5 per cent. This suggests that price pressures are not broad-based in the economy.The central bank also believes that inflation will peak in the October-December quarter of this year and then trend lower — CPI is projected to fall from 5.9 per cent in the third quarter to 5.5 per cent in the fourth quarter and then to 5.3 per cent in the first quarter of the next financial year. However, there is considerable uncertainty over the monsoon and El Nino. This could have implications for both kharif as well as rabi crops. Oil prices also remain volatile — India’s crude oil basket is currently around $85.19 per barrel. “Global oil prices have remained volatile with sharp two-way movements triggered by geopolitical developments, blurring the near-term outlook”, the MPC noted. Growth, though, appears to be holding up, with high-frequency indicators suggesting that the momentum is healthy. The RBI has noted that in the first quarter the economy performed better than expected. Private consumption is “robust” and investment remains “resilient”. The central bank has also marginally upped its growth forecast to 6.7 per cent for the year. This is in line with assessments of most economists.AdvertisementGlobally, central banks are being cautious. Last week both the US Federal Reserve and the Bank of England chose to keep interest rates unchanged even as inflation remains elevated. Earlier, the European Central Bank had also held rates steady, even as other central banks like the Bank of Korea and Japan raised interest rates. The RBI is likely to persist with its wait and watch approach. Generalised inflation pressures remain “modest”. However, as it also notes, “the risks of second-round impact of higher food, fuel and other input prices translating to broad-based inflation persist.” Policy action will be contingent on greater clarity emerging over the inflation trajectory.