“The RBI’s decision to keep the repo rate unchanged at 5.25% and maintain a neutral stance was largely in line with expectations. The policy outcome carries a mildly dovish undertone, with the inflation forecast for FY27 revised lower to 5.0% while the growth projection has been raised to 6.7%, highlighting improving macroeconomic fundamentals. The moderation in inflation expectations has been driven by easing energy prices following reduced West Asia tensions, although geopolitical risks continue to warrant caution. At the same time, growth remains resilient, supported by healthy export momentum, robust private consumption, recent trade agreements and an improving balance of payments position aided by RBI’s forex and capital flow measures. The RBI has rightly reiterated its data-dependent approach going forward. Despite markets continuing to price in policy rate hikes over the next 6-12 months, the softer-than-expected tone of the policy has supported bond markets, with the 10-year G-Sec yield declining around 3 bps to 6.78% post the announcement.”
