New Delhi: The Reserve Bank of India (RBI) on Wednesday held its key repo rate at 5.50% for the second consecutive policy review, as it assesses the effects of earlier rate cuts and recent tax reductions amid global trade uncertainties. The six-member monetary policy committee (MPC) voted unanimously to maintain the rate and continue with a “neutral” policy stance.
The central bank had cut the repo rate by 100 basis points in the first half of 2025 but paused at its previous meeting in August. RBI Governor Sanjay Malhotra said the panel preferred a “wait-and-watch” approach to allow the impact of past policy measures and recent tax reliefs on consumer demand to materialise, while also accounting for potential headwinds from punitive US trade tariffs on India.
The RBI raised its GDP growth forecast for FY26 to 6.8%, up from the earlier estimate of 6.5%, citing strong domestic demand and favourable monsoon conditions. The Indian economy had grown at a 7.8% rate in Q1 (April–June) compared to the previous year. Inflation is projected at 2.6% for FY26, lower than the prior estimate of 3.1%, supported by lower food prices and tax rate cuts. Annual inflation stood at 2.07% in August, remaining close to the lower end of the central bank’s 2%-6% tolerance band.
Market reaction was muted, with India’s 10-year benchmark bond yield rising slightly to 6.6038%, the rupee firming marginally to 88.75, and equity indexes trading slightly higher. Analysts noted that the RBI’s decision reflects caution amid external uncertainties while maintaining a supportive stance for domestic growth.
