After delivering three consecutive rate cuts, the Reserve Bank of India (RBI) has opted to maintain the status quo in its third bi-monthly monetary policy review for FY2025-26. The central bank on Wednesday kept the key policy repo rate unchanged at 5.5%, reflecting a cautious approach amid lingering global uncertainties, especially surrounding tariffs and trade dynamics. The Monetary Policy Committee (MPC), led by RBI Governor Sanjay Malhotra, voted unanimously in favour of holding the rate and maintaining a neutral stance.
Governor Malhotra announced that the GDP growth forecast for FY26 remains unchanged at 6.5%, indicating the central bank’s confidence in the ongoing economic recovery despite external headwinds. “While domestic indicators point to sustained momentum in consumption and investment, global uncertainties, particularly tariff-related risks, continue to pose a challenge,” the governor stated in his policy address.
One of the highlights of the announcement was a downward revision in the inflation forecast. The RBI now expects inflation to average 3.1% for the current fiscal year, a notable reduction from its previous projection of 3.7%. This revision comes on the back of easing food and fuel prices, improved supply chains, and sustained policy support, which have collectively helped temper inflationary pressures.
The decision to hold rates comes after a cumulative 100 basis points reduction in the repo rate since February 2025, including a sharp 50 basis point cut in June, aimed at spurring demand and supporting growth. However, the RBI has signalled that further rate adjustments would depend on incoming data and evolving macroeconomic conditions.
The governor also reassured markets that liquidity conditions remain comfortable, and the central bank will continue to use both conventional and unconventional tools to ensure financial stability. “Our approach is calibrated, data-dependent, and responsive to dynamic developments both globally and domestically,” he noted.
With this move, the RBI has struck a delicate balance between supporting growth and guarding against potential inflationary flare-ups, all while navigating a complex international trade environment.
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