MUMBAI: The Monetary Policy Committee (MPC) of the Reserve Bank of India on Friday unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, while maintaining its neutral monetary policy stance amid rising global uncertainties, geopolitical tensions in West Asia and concerns over inflationary pressures.
Announcing the decision, Sanjay Malhotra said the MPC, after a comprehensive assessment of evolving macroeconomic and financial conditions, voted unanimously to leave the policy repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 5.25 per cent.
“Consequently, the Standing Deposit Facility (SDF) rate remains at 5 per cent and the Marginal Standing Facility (MSF) rate and the Bank Rate at 5.5 per cent,” Sanjay Malhotra said while presenting the monetary policy decision.
Explaining the rationale behind the move, Sanjay Malhotra highlighted the challenging global economic environment characterised by heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility and cautious business sentiment.
“The global economy has been shaped by heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility, and cautious business sentiment. Let me at the very outset emphasise that the Indian economy entered this episode of global turbulence with much better fundamentals than in previous similar episodes,” he said.
Sanjay Malhotra noted that while India remains relatively well-positioned to withstand external shocks, policymakers must use the current phase of global turbulence as an opportunity to further strengthen the country’s economic resilience.
“It is important to not only confront and address these challenges, but also, at the same time, take this as an opportunity to further enhance our resilience,” he added.
The RBI Governor also pointed to the continuing geopolitical impasse in West Asia, rising energy prices and disruptions in global supply chains as key risks affecting the global economic outlook.
According to Sanjay Malhotra, monetary policy across major economies has become increasingly cautious as central banks face the difficult task of balancing economic growth with inflation control. He observed that several major advanced economy central banks may increasingly lean towards monetary tightening in response to inflationary pressures.
While global equity markets have remained buoyant, supported by optimism surrounding artificial intelligence-driven growth, global bond markets continue to face pressure due to renewed inflation concerns and worries over debt sustainability, he said.
The latest decision follows the MPC’s April policy meeting, where members had also unanimously voted to keep the repo rate unchanged at 5.25 per cent while retaining the neutral policy stance.
The RBI’s decision signals a cautious approach as policymakers continue to monitor domestic inflation trends, global economic developments and geopolitical risks before considering any future changes to interest rates.
