RBI Holds Repo Rate Steady at 5.5%: Policy Stance Maintained at Neutral

On Aug 6, 2025, the Reserve Bank of India's Monetary Policy Committee (MPC), led by the Governor Sanjay Malhotra, opted to keep the repo rate unchanged at 5.5%, marking a pause after 3 successive rate cuts that collectively lowered the benchmark rate by 100 basis points since February. The decision was taken unanimously by all committee members.

Along with policy rates, the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) also remain unchanged. The RBI maintained its "neutral" policy stance, consistent with June’s position, following a brief shift to an "accommodative" stance in April.

RBI Governor Sanjay Malhotra emphasised that the MPC sees "very limited room" for further policy easing to support economic growth. However, he noted India’s robust economic outlook amid evolving global dynamics.

GDP Growth Forecast

Despite uncertainties stemming from global headwinds, including ongoing tensions related to Trump-era tariffs, the RBI retained its real GDP growth forecast for FY26 at 6.5%. The central bank also reaffirmed its quarterly growth projections:

• Q1 FY26: 6.5%
• Q2 FY26: 6.7%
• Q3 FY26: 6.6%
• Q4 FY26: 6.3%
• Q1 FY27: 6.6%

Inflation Growth

On the inflation front, the RBI revised its CPI forecast downward for FY26 to 3.1%, from the earlier projection of 3.7%. Quarterly inflation estimates were also adjusted:

• Q2 FY26: Lowered to 2.1% (from 3.4%)
• Q3 FY26: Revised down to 3.1% (from 3.9%)
• Q4 FY26: Maintained at 4.4%

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However, inflation is expected to pick up again in the next fiscal year, with the CPI forecast for Q1 FY27 set at 4.9%.

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