Delhi, India – The Reserve Bank of India (RBI) held interest rates unchanged on Wednesday. It is awaiting developments on whether volatile oil prices stemming from the Iran conflict will lead to broader inflationary pressures. The RBI kept its benchmark repo rate at 5.25 percent and maintained its neutral stance on monetary policy. This followed a meeting of the Monetary Policy Committee (MPC) held from August 3-5. The meeting took place amid heightened global uncertainty and volatility related to the ongoing conflict in West Asia.
Consensus of the Monetary Policy Committee and related interest rates
The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously voted to maintain the repo rate at 5.25 percent. Following this decision, the Standing Deposit Facility (SDF) rate remained unchanged at 5 percent. The Marginal Standing Deposit Facility (MSF) and the Bank Rate also remained at 5.5 percent. RBI Governor Sanjay Malhotra announced the details of the decision at a press conference on Wednesday. He explained that the MPC took this step after a thorough and careful assessment of the evolving domestic economic and financial conditions. Moreover, he also noted a careful reading of the surrounding global economic outlook.
The repercussions of the conflict in West Asia on the global economy
In explaining the reasons for the decision, Governor Sanjay Malhotra noted that the ongoing conflict in West Asia has disrupted key international trade routes and global supply chains. This has led to a significant increase in market volatility and a general weakening of business confidence.
He added that forecasts indicate a potential slowdown in global growth rates, with inflation remaining high throughout 2026. He also noted that uncertainty has intensified as some major central banks have moved towards tightening their monetary policies. At the same time, others have remained cautiously on the sidelines. Malhotra emphasized that crude oil prices, currency markets, and financial markets continue to experience wide volatility. This volatility is driven by the ongoing political and military developments in regional conflicts.
