RBI Holds Repo Rate Steady at 5.50% Amid Global Uncertainty The Reserve Bank of India (RBI) kept its benchmark repo rate unchanged at 5.50% on Wednesday, in line with market expectations. The Monetary Policy Committee (MPC) voted unanimously to maintain the current rate and continue with a neutral policy stance, citing the need to assess the effects of earlier monetary easing and recent fiscal measures.
The central bank reduced policy rates by a cumulative 100 basis points in the first half of 2025 but opted to pause in its previous meeting in August. Economists had widely anticipated a status quo decision this time, though some had pointed to subdued inflation and weakening growth signals as possible reasons for a further cut. Economic and Market Reactions Following the policy announcement, India’s benchmark 10-year bond yield rose 2 basis points to 6.60%, while the rupee edged up slightly to 88.75 against the dollar. Domestic equity indices also registered modest gains.
Governor Sanjay Malhotra emphasized that the committee preferred a “wait-and-watch” approach to allow the impact of both monetary and fiscal interventions to filter through. Earlier rate cuts, coupled with recently announced tax reductions on consumer goods, are expected to boost domestic demand. However, challenges persist, with continued trade tensions and punitive U.S. tariffs weighing on Indian exports. Growth and Inflation Outlook The RBI raised its GDP growth forecast for the current financial year to 6.8%, up from 6.5% previously, supported by robust domestic demand. The Indian economy had already demonstrated resilience, expanding 7.8% in the April-June quarter compared with the previous year.
On the inflation front, the central bank expects consumer price inflation to average 2.6% for the year, lower than its earlier projection of 3.1%. Softer food prices and recent tax cuts have eased inflationary pressures, allowing inflation to remain comfortably within the RBI’s target range of 2%-6%. India’s headline inflation stood at 2.07% in August, inching higher due to food prices but still at the lower end of the tolerance band. Policy Outlook With inflation under control and growth momentum holding up, the RBI has chosen to maintain policy flexibility while monitoring external risks.
The current stance indicates that the central bank is prepared to act if global headwinds intensify or if domestic demand weakens more sharply than expected.
