The Reserve Bank of India (RBI) has decided to keep the key repo rate unchanged at 5.5%, as the Monetary Policy Committee (MPC) concluded its three-day meeting on August 6 (Wednesday). The announcement made today by RBI Governor Sanjay Malhotra, reflects a cautious stance as the central bank monitors inflation trends and global economic uncertainties, particularly new tariffs and trade tensions.
“The Monetary Policy Committee, MPC, met on the 4th, 5th and 6th of August to deliberate and decide on the policy repo rate. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC voted unanimously to keep the policy repo rate under the Liquidity Adjustment Facility unchanged at 5.5%,” said RBI Governor Sanjay Malhotra.
He further confirmed that the Standing Deposit Facility (SDF) rate will remain at 5.25%, with the Marginal Standing Facility (MSF) rate and the Bank Rate continuing at 5.75%. The MPC also decided to “continue with a neutral stance,” indicating that the central bank is not currently leaning towards a rate hike or cut.
Governor Malhotra explained the decision, noting that while headline inflation has been “much lower than projected earlier,” this is primarily due to volatile food prices, especially in vegetables. He highlighted that core inflation has remained steady around the 4% mark and is projected to rise towards the end of the financial year.
On the economic growth front, the Governor stated that India’s growth is “robust and as our earlier projections go, of course, below our expectations.” He acknowledged that the full impact of the 100 basis points in rate cuts since February is still “unfolding” on the broader economy.
Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, commented on the decision, stating that the MPC’s move to hold rates steady comes amid global uncertainties, even as inflation remains benign. She added, “With inflation likely to trend higher post the near term favourable trends, the bar for rate cuts ahead is set very high. We can see some room for the last leg of easing only if growth momentum slows significantly.”
The RBI’s decision to maintain a neutral stance and keep rates unchanged indicates a wait-and-watch approach, allowing time for previous policy actions to fully transmit into the credit markets and the broader economy before making any further adjustments.
