The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday left the repo rate unchanged at 5.5% and retained its neutral stance, sticking to a wait-and-watch approach against the backdrop of US tariff shocks and geopolitical uncertainties. The decision, taken unanimously, follows cumulative rate cuts of 100 basis points earlier this year.
The move was in line with market expectations and continues the pause signalled in the August policy, when the MPC chose to assess the impact of global tariff developments on India’s economy.
On inflation, the committee lowered its FY26 consumer price index (CPI) forecast sharply, projecting an average of 2.6%, down from 3.1% estimated in August and 3.7% earlier in June. However, it cautioned that headline inflation could edge above 4% by Q4, driven by base effects. For FY27, Q1 CPI inflation is projected at 4.5%, with risks “evenly balanced.”
“The current macroeconomic conditions, outlook and uncertainties call for continuation of the policy repo rate at 5.5%,” Governor Sanjay Malhotra said. He added that the committee would “wait for further transmission of front-loaded rate cuts to credit markets and the broader economy.”
On growth, the MPC retained its FY26 forecast, highlighting resilience from domestic demand, a good monsoon, easing inflation, monetary stimulus, and the positive impact of GST rate rationalisation. Even so, it flagged risks from weaker external demand and tariff-related headwinds that could weigh on activity in the second half of the year.
Summing up, Malhotra said that while inflation has moderated significantly and policy space has opened to support growth, it was “prudent to await the impact of past actions and greater clarity on trade-related uncertainties before charting the next course.”