RBI Keeps Interest Rates Unchanged, Flags Risks from Global Uncertainty

RBI Holds Repo Rate at 5.5%, Cites Inflation Risks and Global Trade Uncertainty.

The Reserve Bank of India (RBI) kept the repo rate unchanged at 5.5% on Wednesday, as the Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, wrapped up its three-day meeting. This marks a second consecutive pause after a 100 basis point rate cut earlier this year.

“The MPC unanimously voted to maintain the policy repo rate at 5.5%,” Malhotra announced. The Standing Deposit Facility remains at 5.25%, while the Marginal Standing Facility and Bank Rate stay at 5.75%. The central bank also retained its neutral stance.

Inflation Concerns Linger
Explaining the pause, Malhotra said while headline inflation has eased—driven largely by a drop in vegetable prices—volatility in food costs and sticky core inflation near 4% remain key risks. “Inflation is projected to pick up again later in the financial year,” he cautioned, pointing to ongoing uncertainty in price trends despite recent relief.

Growth Holding Steady but Below Expectations
India’s economic growth remains resilient but is trailing earlier RBI projections. “Growth is strong but slightly below our expectations,” Malhotra said. He added that the impact of the 100 basis point rate cut since February is still unfolding, and further policy action will depend on how this plays out.

Wait-and-Watch Approach
With monetary transmission still in progress, the central bank opted to wait and observe the broader effects of earlier rate cuts before taking any further steps. “The current conditions warrant a pause. We’ll closely monitor inflation and growth data to guide future policy,” Malhotra stated.

Neutral Stance Maintained
The MPC emphasized its data-dependent approach moving forward. “We will maintain vigilance on evolving growth-inflation dynamics,” said Malhotra. Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, noted, “The RBI’s decision reflects global uncertainties and inflation risks. The scope for more easing exists only if growth weakens sharply.”