The policy decision made in the Aug’25 MPC reflected RBI’s confidence on GDP growth notwithstanding global headwinds. This was reflected in the unchanged GDP projections for FY26 and sanguine projection for Q1FY27. RBI tempered its CPI forecast for FY26 sharply, attributing the same to sinking vegetable prices. At the same time risks to inflation remain two sided as seen in its projection for Q1FY27. Systemic liquidity remains ample and has ensured quick transmission to bank rates compared to previous cycles. Benchmark yields are set to remain rangebound even as corporate spreads start mirroring altered risk dynamics.
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