The Reserve Bank of India’s (RBI) decision on Wednesday to keep its policy interest rate unchanged at 5.5 per cent for the second consecutive time came as no surprise as Trump’s tariffs continue to raise concerns.
The apex bank has already cut interest rates by 100 bps so far this year since February, 2025. In its June policy review, the RBI had trimmed the repo rate by 50 basis points to 5.5 per cent.
Based on the recommendation of the MPC, the RBI reduced the repo rate by 25 bps each in February and April, and 50 basis points in June amidst easing retail inflation.
Announcing the fourth bi-monthly monetary policy of the current fiscal, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously decided to keep the short-term lending rate or repo rate unchanged at 5.5 per cent with a neutral stance.
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September’s Goods and Services Tax (GST) rate rationalisation had an important role to play in the MPC’s deliberations, since it had a sobering impact on consumption and growth. The committee took into account a slowing down of the economic expansion owing to the tariffs imposed by the US.
The central bank has been tasked by the government to ensure that Consumer Price Index (CPI) based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
The retail inflation is trending below 4 per cent since February this year. It eased to a six-year low of 2.07 per cent in August, aided by an easing of food prices and favourable base effect.
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