Mumbai, Oct 1: The Reserve Bank of India (RBI) on Wednesday kept the key policy interest rate unchanged at 5.5 per cent for the second consecutive review, with Governor Sanjay Malhotra cautioning that tariff-related uncertainties could dampen India’s economic momentum in the months ahead.
Announcing the fourth bi-monthly monetary policy for the current financial year, Malhotra said the Monetary Policy Committee (MPC) unanimously decided to maintain the repo rate with a neutral stance. He explained that while Goods and Services Tax (GST) rate rationalisation is expected to have a moderating impact on household consumption and overall growth, tariff developments at the global and domestic levels pose a risk to economic expansion in the second half of FY26.
The RBI has cumulatively cut the repo rate by 100 basis points since February this year to support growth amid easing inflationary pressures. The central bank lowered the policy rate by 25 basis points each in February and April, followed by a sharper 50-basis-point reduction in June, bringing the repo to 5.5 per cent. The pause in October signals a more cautious stance in light of global uncertainties despite favourable inflation trends.
Retail inflation, measured by the Consumer Price Index (CPI), has remained consistently below the RBI’s 4 per cent target since February 2025. In August, it slipped further to a six-year low of 2.07 per cent, aided by softening food prices and a favourable base effect. The sustained decline in inflation has given the RBI room to ease rates earlier this year. However, officials indicated that maintaining price stability remains the primary mandate, with the government tasking the RBI to ensure CPI-based retail inflation averages 4 per cent, with a permissible margin of 2 per cent on either side.
The RBI’s latest decision reflects a balancing act between supporting growth and guarding against external risks. While domestic inflation is well under control, trade tensions, shifting tariff regimes, and global uncertainties continue to cast a shadow on India’s growth outlook.
Analysts say the decision to hold rates steady was widely expected, as the central bank prefers to assess the impact of past rate cuts and monitor tariff-related risks before moving further. With inflation at multi-year lows, the RBI still retains policy space to act if growth slows sharply, but for now, stability appears to be the preferred approach. (Agencies)
