RBI Holds Repo Rate at 5.25 Percent Signals End of Easing Cycle Amid Inflation and Growth Pressures

By:- Mr. Aditya Mulki, CEO, Navi AMC 

“The RBI’s decision to hold the repo rate at 5.25% with a neutral stance reflects a pragmatic acknowledgment that the easing cycle has run its course for now. We have been cautious on the market over the past few months and have been calling out inflationary pressures due to the current oil crises as well as the probability of below normal monsoons which is also now reflected in revised RBIs CPI guidance of 5.1%.

The downward revision to GDP growth from 6.9% to 6.6% for FY27 is a candid admission that geopolitical headwinds and fuel price pass-throughs are beginning to weigh on the growth outlook. Although in the long run India’s macroeconomic fundamentals such as strong domestic consumption, sustained credit growth and government capex, remain intact.

The meaningful liberalisation of foreign investment limits, extension of the Fully Accessible Route to long-duration bonds, and the concessional forex swap facility for ECBs and FCNR(B) deposits are important measures that indicate the RBI’s intent to deepen India’s capital markets and attract durable long-term foreign flows. This is a constructive medium-term positive for Indian fixed income market.”