Why RBI Held Rates While Global Central Banks Turned Hawkish: India’s Growth-Inflation Balance Explained

Published 5 August 2026 · finance

News business economy Why RBI Held Rates While Global Central Banks Turned Hawkish: India’s Growth-Inflation Balance Explained Why RBI Held Rates While Global Central Banks

News business economy Why RBI Held Rates While Global Central Banks Turned Hawkish: India’s Growth-Inflation Balance Explained Why RBI Held Rates While Global Central Banks Turned Hawkish: India’s Growth-Inflation Balance Explained Published By, Last Updated: August 05, 2026, 11:42 IST The Monetary Policy Committee (MPC) retained its ‘neutral’ stance, saying it needed more clarity on the inflation trajectory amid domestic and global risks. RBI Governor Sanjay Malhotra said the rise in inflation in June was primarily due to higher food and fuel prices, including fuel-induced inflation. The Reserve Bank of India (RBI) kept the benchmark repo rate unchanged at 5.25 per cent in its August monetary policy review even as several global central banks moved towards tighter monetary policy amid inflation concerns, currency pressures and geopolitical uncertainty. The Monetary Policy Committee (MPC) retained its ‘neutral’ stance, saying it needed more clarity on the inflation trajectory amid risks from the southwest monsoon, El Nino conditions, global trade uncertainties and developments in West Asia.

Read more: ‘Global Economy Hostage To West Asia Developments’: RBI Governor’s Warning On Renewed Risks Why Did RBI Not Raise Rates Despite Inflation Risks? The RBI acknowledged that inflation has increased in recent months but it believes current pressures are largely driven by supply-side factors rather than broad-based demand pressures. RBI Governor Sanjay Malhotra said the rise in inflation in June was primarily due to higher food and fuel prices, including fuel-induced inflation. However, core inflation, which excludes food and fuel prices, remained moderate at 3.9 per cent in May and June. The central bank projected CPI inflation for the current financial year at 5 per cent, 10 basis points lower than its earlier estimate. It said greater clarity was needed on the inflation trajectory before taking any policy action. Read more: RBI Keeps Repo Rate Unchanged: What It Means For Your Home Loan EMI?

How Is India’s Inflation Situation Different From Other Countries? Central banks across the world take policy decisions based on their own economic conditions, including inflation levels, currency movements and growth outlook. While some economies have faced stronger inflation pressures requiring tighter monetary policy, the RBI has assessed that India’s inflation remains within a manageable range. The central bank has also noted that generalised inflation pressures remain modest, although risks from higher food, fuel and input costs continue to be monitored. Did India’s Growth Outlook Influence RBI’s Decision? Yes. The RBI’s decision also reflects confidence in the resilience of domestic economic activity. Governor Malhotra said the Indian economy performed better than expected in the April-June quarter. The RBI has highlighted that the services sector continues to support urban consumption, while domestic demand remains steady. Read more: RBI Repo Rate Decision Announced: Will Your FD Interest Rates Change Now?