Inflation is below the RBI’s target. Economic growth is slowing. And borrowers were hoping for lower loan EMIs. So when the RBI’s Monetary Policy Committee met on June 5, 2026, the market thought a rate cut was very likely, but it never came. The repo rate was left unchanged at 5.25%.
At first glance, that decision makes little sense. If inflation is under control, why not cut rates and support growth? What is the RBI seeing that most people are missing?
The answer lies in a simple fact about central banking: the RBI does not make decisions based on where inflation is today. It makes decisions based on where inflation could be six to twelve months from now. And according to the RBI, there are enough warning signs ahead to justify caution.
Let’s understand what changed in this policy announcement and why the central bank decided to hold rates despite inflation sitting comfortably below its target.
