RBI to Hold Rates Through 2026 as Growth Risks Outpace Inflation

The Reserve Bank of India (RBI) has decided to keep its policy rate fixed at 5.25% until the end of 2026.

Growth vs. Inflation Tension

June inflation rose to 4.38%, the first reading above the 4% target since January 2025. The increase reflects spill‑over effects from the Middle East war and global supply‑chain strain, while also signalling heightened growth‑risk pressures.

Reuters Poll Snapshot

■95% (68 out of 72) economists expect the Monetary Policy Committee to leave the repo rate at 5.25% in the August meeting.

■4 respondents forecast a 25‑basis‑point hike.

■Median forecasts suggest rates will stay unchanged at least until early 2027.

■The rupee has depreciated 7% against the dollar year‑to‑date.

Voices from the Market

Aditya Vyas, chief economist at STCI Primary Dealer, noted, "We have already seen some of the war’s trickle‑down to inflation, but a rate hike now would be premature and hurt growth." Kanika Pasricha, chief economic adviser at Union Bank of India, cautioned, "If oil prices stay consistently above $90 a barrel, the RBI may consider a hike in the second half of the fiscal year."

Rupee Weakness and Capital Inflows

The RBI faces a 7% rupee slide against the dollar. In its June policy meeting, the central bank attracted roughly $20 billion of foreign capital to support the currency, yet the influx has not halted the rupee’s decline.

Market participants view the RBI’s rate stance as a stability signal, but long‑term growth outlooks and currency volatility will directly impact air‑freight pricing. While a prolonged rate hold may limit cost volatility for cargo operators, a weakening rupee could raise the price of imported aircraft parts and fuel, putting upward pressure on freight rates. Monitoring these dynamics will be essential for aviation logistics strategy.