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RBI Holds Rate, Raises FY27 Inflation Outlook Amid Monsoon Risk

7/18/2026

26 4 Full Breakdown

Summary

Story summary

Reserve Bank of India (RBI) kept its policy rate at 5.25% and raised the FY27 inflation outlook to 5.1% from 4.6%.
Governor Sanjay Malhotra said fundamentals stay strong despite Asia tensions and monsoon risk.
Inflation hit 4.38% in June, with food inflation at 5.32%, above the 4% target.
Committee will meet Aug 3-5 to set rates amid a 10% below-normal monsoon forecast and a 40% June rainfall deficit threatening agriculture.

History

Historical Context

In 1991 India’s foreign-exchange reserves collapsed after the Soviet Union’s breakup and the Gulf War, prompting Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh to secure a $1.8 billion IMF loan and devalue the rupee by about 19 %. The resulting liberalisation set a precedent for today’s RBI, now led by Governor Sanjay Malhotra, which holds the policy rate at 5.25% amid 5.1% inflation forecasts and a 40% monsoon deficit.

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Story summary

Reserve Bank of India (RBI) kept its policy rate at 5.25% and raised the FY27 inflation outlook to 5.1% from 4.6%.
Governor Sanjay Malhotra said fundamentals stay strong despite Asia tensions and monsoon risk.
Inflation hit 4.38% in June, with food inflation at 5.32%, above the 4% target.
Committee will meet Aug 3-5 to set rates amid a 10% below-normal monsoon forecast and a 40% June rainfall deficit threatening agriculture.

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