As inflation declines and growth continues to be robust, the RBI keeps the repo rate at 5.5%.
The central bank maintains stable interest rates while reducing the forecast for inflation and increasing growth estimates for the FY 2025–2026.
As the central bank weighs improving inflation trends against a robust economic outlook, the Reserve Bank of India met market expectations on Wednesday by maintaining its key lending rate at 5.5%. In keeping with the neutral policy stance that allows flexibility for future action, Governor Sanjay Malhotra made the announcement after the three-day meeting of the Monetary Policy Committee.
The decision was made as the economy’s overall inflation situation improved dramatically. Governor Malhotra stated that recent GST reforms and falling food prices have improved the outlook for inflation. The central bank lowered its inflation estimate for 2025–2026 from its initial forecast of 3.1% in August to 2.6%. According to quarterly estimates, the second and third quarters have especially low readings of 1.8%, while the final quarter has a reading of 4%.
RBI also updated its GDP forecast for the current fiscal year from 6.5% to 6.8%, indicating optimism about economic growth despite maintaining rates at their current level. With growth of 7.8% and 7% in the first two quarters, the central bank anticipates strong momentum in the first half. In the second half, it expects growth to moderate down to about 6% levels. Favourable agricultural conditions after good monsoon, strong services sector performance, and increasing investment activity as capacity utilization increases, all contribute to this growth.
Nonetheless, the central bank recognized that there might be difficulties in the future. Global trade tensions and ongoing tariff uncertainties are risks that could affect growth in the second half of the fiscal year, according to Governor Malhotra. The committee pointed out that global market swings and geopolitical unpredictabilities continue to pose threats to India’s economic future. The rate decision elicited differing responses from financial experts.
Leaders in the real estate sector pointed out that while unchanged rates maintain home loan costs, they do not increase new buyers’ affordability. Major bank economists viewed the action as a dovish pause, arguing that if economic conditions worsen later this year, there is still room for rate cuts of 25 to 50 basis points due to uncertainty surrounding trade policies.
The central bank stressed that it is being cautious and waiting to see how the economy is affected by recent fiscal measures and earlier rate cuts. The central bank has positioned itself to react flexibly as domestic and international conditions change in the upcoming months by keeping rates stable and forecasting lower inflation and higher growth.
