Synopsis: The Reserve Bank of India (RBI) has maintained the repo rate at 5.5% for the second time in a row, signaling caution amid global trade uncertainties. Inflation forecasts have been slashed while GDP growth projections see an upward revision.
RBI Holds Steady on Policy Rate
The Reserve Bank of India (RBI) has decided to hold the repo rate at 5.50%, a move widely expected by market analysts. This comes after the central bank slashed rates by a total of 100 basis points earlier in 2025, before choosing to pause in its August meeting.
Inflation Forecast Revised Downward
RBI Governor announced that inflation is easing, thanks to falling food prices and GST rate cuts. The inflation forecast for FY2025-26 has been lowered to 2.6%, compared to the 3.1% projected in August.
GDP Growth Outlook Brightens
The Monetary Policy Committee (MPC) raised India’s GDP growth forecast to 6.8%, up from 6.5%. The revision reflects:
- Robust domestic demand
- Favorable monsoon
- Easing monetary policies
- Impact of GST cuts
“This positive growth trajectory underlines the resilience of India’s economy,” said MPC member Malhotra.
Neutral Stance and Wait-and-Watch Approach
The RBI Governor emphasized that the committee is maintaining a neutral stance, allowing previous policy changes to take full effect.
“It would be prudent to wait for the policy actions to play out before charting our next move,” the Governor stated.
Impact on Borrowers and Economy
A lower policy rate means cheaper borrowing for consumers and businesses, leading to higher spending and investment. However, much depends on how quickly commercial banks pass on the benefits to borrowers, which remains a key factor for policy effectiveness.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult professional advisors before making investment or borrowing decisions.
