Mumbai: The Reserve Bank of India (RBI) kept the policy repo rate unchanged at 5.5% on Wednesday, putting a temporary halt to its monetary easing cycle after delivering three successive rate cuts earlier this year. The decision, announced in the central bank’s third bi-monthly monetary policy for FY26, reflects a calibrated approach as global economic conditions remain unpredictable.
The Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra, voted unanimously to maintain both the current repo rate and the central bank’s ‘Neutral’ policy stance. This decision follows cumulative rate reductions totaling 100 basis points since February, a move that had been aimed at reviving domestic demand and supporting post-pandemic economic recovery.
Governor Malhotra, addressing the media after the policy announcement, stated that India’s growth outlook remains strong, with the GDP forecast for FY26 retained at 6.5%. He noted that while inflation trends are encouraging, global risks—particularly those related to rising trade tensions, shifting tariff regimes, and commodity price instability—require continued vigilance.
In a positive signal for households and businesses, the RBI revised its inflation forecast for FY26 down to 3.1%, citing a consistent decline in price pressures. The central bank’s earlier estimate had pegged inflation at 3.7%. A major factor behind the revision is the sharp fall in retail inflation, measured by the Consumer Price Index (CPI), which dropped to 2.1% in June, marking a six-year low.
The decline in inflation has been driven largely by a sharp correction in food prices. According to RBI data, food inflation turned negative in June, recording -1.06%—a steep slide from May’s 0.99%. Essential categories such as vegetables, cereals, milk, pulses, and spices all showed price declines, aided by strong harvests and easing supply bottlenecks.
Despite these positive developments, the RBI hinted that future rate decisions would remain data-driven. Malhotra stressed the need to stay cautious given the evolving global landscape, where trade disruptions and new tariff measures by major economies could affect India’s external sector.
