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The Reserve Bank of India has maintained its policy interest rate at 5.5% for the second consecutive time, reflecting caution amid global trade uncertainties and potential slowdown from U.S. tariff developments. The decision follows a series of rate cuts earlier in the year aimed at boosting growth. Retail inflation remains subdued, easing to a six-year low of 2.07% in August, supported by falling food prices. The RBI continues to balance supporting economic activity while keeping inflation under control through measured policy actions.
The Reserve Bank of India (RBI) recently held its policy interest rate at 5.5%, marking the second consecutive time rates have remained unchanged. Governor Sanjay Malhotra explained that the Monetary Policy Committee (MPC) made this unanimous decision in response to uncertainties arising from global trade, especially the potential impact of U.S. tariffs on Indian exports. Advertisement
While consumption and economic growth are expected to be affected by GST rate rationalization, tariff-related developments could slow economic expansion in the second half of the current fiscal year. The RBI had earlier reduced the policy rate by a total of 100 basis points since February, with reductions in February, April, and a larger cut of 50 basis points in June, aiming to support economic activity and manage inflation.
Retail inflation, as measured by the Consumer Price Index (CPI), has stayed below 4% since February and dropped to a six-year low of 2.07% in August. This easing is attributed to lower food prices and a favorable base effect. Despite these positive trends, the RBI continues to monitor inflation and economic growth closely, maintaining a neutral policy stance.
By keeping the repo rate steady, the central bank aims to balance supporting growth while keeping inflation within the government-mandated target range of 4%, with a margin of ?2%. The decision signals the RBI?s cautious approach in a time of global economic uncertainty and potential trade disruptions, while providing stability to financial markets and borrowers.
Source PTI
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