MUMBAI: The Reserve Bank of India (RBI) has maintained its policy interest rate at 5.5% for the second consecutive time, citing concerns regarding tariff uncertainties.
During the announcement of the fourth bi-monthly monetary policy for the current fiscal year, RBI Governor Sanjay Malhotra stated that the Monetary Policy Committee (MPC) unanimously opted to keep the short-term lending rate, known as the repo rate, unchanged at 5.5% with a neutral stance.
Governor Malhotra indicated that while the rationalization of GST rates could have a moderating effect on consumption and growth, developments related to tariffs may hinder economic expansion in the latter half of the fiscal year.
Since February 2025, the RBI has reduced the policy rate by 100 basis points. In its last review in June, the repo rate was cut by 50 basis points to 5.5%.
The government has tasked the central bank with keeping the Consumer Price Index (CPI) based retail inflation at around 4%, with an allowable margin of 2% on either side.
Following the MPC’s recommendations, the RBI had previously lowered the repo rate by 25 basis points in both February and April, and by 50 basis points in June, in response to declining retail inflation.
Retail inflation has been trending below 4% since February, easing to a six-year low of 2.07% in August, supported by falling food prices and a favorable base effect.
