New Delhi: The Reserve Bank of India (RBI) has decided to keep its key repo rate steady at 5.50%, matching what market experts had anticipated. This pause comes as the central bank assesses the effects of its earlier rate cuts and recent tax reductions, while keeping an eye on uncertainties in global trade. Earlier in 2025, the RBI had slashed the repo rate by a total of 100 basis points, but chose to hold it steady in its August meeting.
RBI Lowers 2025-26 Forecast to 2.6%
RBI Governor highlighted that inflation is easing, thanks to a significant drop in food prices and recent GST rate cuts. As a result, the central bank has lowered its average inflation forecast for 2025-26 to 2.6 per cent, down from the 3.1 per cent projected in August.
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RBI Raises GDP Growth Forecast to 6.8%
The Monetary Policy Committee has upgraded India’s GDP growth projection to 6.8 per cent, up from the earlier estimate of 6.5 per cent. This positive revision is supported by strong domestic demand, a favorable monsoon, easing monetary policies, and recent GST rate cuts, said Malhotra.
The RBI Governor further stated that the monetary policy committee was sticking to the neutral stance as it was waiting for the earlier monetary policy easing was still playing out and trade related implications are unfolding.
“It would be prudent to wait for the policy actions to play out before charting out are next round of monetary policy actions,” the RBI Governor said. The repo rate has been reduced 100 basis points in quick succession since February this year and the transmission to the economy was still working out.
A lower policy rate and more liquidity with banks leads to a decline in interest rate on bank loans which makes borrowing easier for consumers as well as businesses resulting in more consumption and investments in the economy leading to higher growth.
However, the effectiveness of the rate cut hinges on how quickly and efficiently commercial banks pass on the benefits to borrowers. (With IANS Inputs)
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