Mucahithan Avcioglu
05 June 2026•Update: 05 June 2026
India’s central bank held its benchmark interest rate steady on Friday while lowering its growth outlook and raising its inflation forecast, as surging global energy prices and pressure on the rupee cloud the economic outlook.
The Reserve Bank of India (RBI) kept the policy rate unchanged at 5.25%, in line with market expectations.
The bank raised its inflation projection for the financial year ending March 2027 by 50 basis points to 5.1%, while cutting its growth forecast to 6.6% from a previous estimate of 6.9%.
Sanjay Malhotra, the RBI governor, said monetary policy had become more cautious as the global outlook remains affected by geopolitical tensions in the Middle East.
He said sharply rising energy prices and global supply chain disruptions continued to weigh on economic activity.
India, a major energy importer, has faced growing pressure from higher global oil prices, which have increased concerns over the country’s import bill and added strain to the rupee currency.
The currency has weakened more than 6% against the US dollar so far this year, trading near 95.78 against the greenback, according to market data cited in the report.
The Indian government and policymakers have taken several steps to support the currency and preserve foreign exchange reserves, including measures aimed at curbing gold demand and limiting pressure from fuel imports.
Inflation in India rose for a sixth consecutive month in April to 3.48%, up from 3.40% in March, though it remained below the RBI’s 4% target.
Food inflation, a key component of India’s consumer price index, climbed to 4.2% in April from 3.87% in March.