MUMBAI: The Reserve Bank of India (RBI) has maintained the policy rate at 5.5% following three consecutive interest rate cuts, citing concerns over tariff fluctuations.
In the announcement of the third bi-monthly monetary policy for the fiscal year, RBI Governor Sanjay Malhotra shared that the growth rate forecast for FY26 remains at 6.5%.
The Monetary Policy Committee (MPC) unanimously opted to keep the short-term lending rate, or repo rate, steady at 5.5% with a neutral stance.
Regarding inflation, the RBI Governor reduced the projection for the current financial year to 3.1%, down from the previous estimate of 3.7%.
Since February 2025, the RBI has cut the policy rate by a total of 100 basis points. In the last policy review in June, the repo rate was lowered by 50 basis points to the current 5.5%.
The government has tasked the central bank with ensuring that CPI-based retail inflation stays around 4%, allowing for a margin of 2% on either side.
As per the MPC’s advice, the RBI reduced the repo rate by 25 basis points in February and April, followed by a 50 basis-point decrease in June, all in response to easing retail inflation.
Retail inflation has remained below 4% since February, dipping to a six-year low of 2.1% in June, largely due to declines in food prices and favorable base effects.
Food inflation, which makes up almost half of the CPI basket, fell to (-)1.06% in June compared to 0.99% in May. This decline was mainly influenced by lower prices in essential categories such as vegetables, pulses, meat, fish, cereals, sugar, milk, and spices.
The MPC is comprised of three RBI officials—Sanjay Malhotra (Governor), Poonam Gupta (Deputy Governor), Rajiv Ranjan (Executive Director)—along with three external members, including Nagesh Kumar (Director and Chief Executive, Institute for Studies in Industrial Development, New Delhi), Saugata Bhattacharya (Economist), and Ram Singh (Director, Delhi School of Economics).
