RBI Keeps Repo Rate Unchanged At 5.5%

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) unanimously voted to keep the benchmark repo rate unchanged at 5.5%, Governor Sanjay Malhotra announced on Wednesday.

The committee adopted a "wait-and-watch" approach to assess the impact of previous policy actions and gain more clarity on the economic outlook before making its next move.

Consequently, the Standing Deposit Facility (SDF) rate remains at 5.25%, while the Marginal Standing Facility (MSF) rate and the Bank Rate are unchanged at 5.75%. The MPC also decided to maintain its "neutral" stance.

Inflation Eases, But Growth Headwinds Emerge
The decision to pause was supported by a significantly improved inflation outlook. Governor Malhotra highlighted that the average headline inflation forecast for the current year has been revised downwards to 2.6%, a sharp drop from the 3.7% projected in June. Core inflation is also expected to remain contained.

However, the committee noted emerging risks to economic growth. While domestic economic activity remains resilient-buoyed by a favourable monsoon, lower inflation, and previous monetary easing-external factors pose a threat. The Governor stated that global uncertainties and "tariff-related developments" are likely to decelerate growth in the second half of the fiscal year.

Despite these external pressures, Malhotra noted that domestic reforms like the GST and strong remittances, which are expected to keep the current account deficit sustainable, will help offset the impact to some extent. He concluded that while current macroeconomic conditions have created "policy space" to support growth in the future, the MPC deemed it prudent to wait for greater clarity to emerge.