<p>The decision of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) to keep the benchmark repo rate unchanged at 5.5% is based on an optimistic reading of the country’s economy and on the sense that the inflationary situation, which had engaged the apex bank’s attention for long, is behind us, at least for the near future. In its meeting on Wednesday, the MPC decided to keep the monetary policy stance unchanged at ‘neutral’. The rate has been kept unchanged for the second consecutive time. In its August meeting, the committee kept the rate unchanged and its stance neutral. This followed three consecutive cuts in 2025 that brought the rate down from 6.5% by 100 basis points. While this was aimed at boosting the slowing economy, the present stance signals optimism and confidence in adverse circumstances. A good monsoon and the recently announced GST reforms have contributed to this position.</p>.<p>The optimism is evident from the RBI’s projections and the comments made by Governor Sanjay Malhotra. The RBI now estimates that the Indian economy will grow at 6.8% in 2025-26 – this is higher than the 6.5% projection made in August. It has also made a downward revision of its inflation forecast for the current fiscal year, from 3.1% in August to 2.6%. The 6.8% growth rate projection is above expectations. When there is momentum in growth and the inflation is benign, there is no requirement for the RBI to deploy its monetary tools to effect an outcome. The MPC noted that the current macroeconomic conditions and the outlook have “opened up policy space for further supporting growth,” and that the decision to keep the repo rate unchanged was unanimous.</p>.RBI's decision to pause repo rates at 5.5% will help maintain home loan EMIs: Real estate experts.<p>The decision also marks a sense of caution on the part of the RBI in responding to the evolving domestic and international situation. The Donald Trump administration’s tariff war on the world and its heightened significance for India, the ongoing geopolitical tensions, and the volatility in the global financial markets pose serious risks to the growth outlook. The RBI Governor said the neutral stance would continue as there was still uncertainty over the tariffs, and a monetary policy transmission was underway. The MPC has given time for the earlier rate cuts to be transmitted to the economy. The pause decision may mean that the Committee has adopted a policy of wait and watch, and would act if the situation gets aggravated on the trade and tariffs front.</p>
<p>The decision of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) to keep the benchmark repo rate unchanged at 5.5% is based on an optimistic reading of the country’s economy and on the sense that the inflationary situation, which had engaged the apex bank’s attention for long, is behind us, at least for the near future. In its meeting on Wednesday, the MPC decided to keep the monetary policy stance unchanged at ‘neutral’. The rate has been kept unchanged for the second consecutive time. In its August meeting, the committee kept the rate unchanged and its stance neutral. This followed three consecutive cuts in 2025 that brought the rate down from 6.5% by 100 basis points. While this was aimed at boosting the slowing economy, the present stance signals optimism and confidence in adverse circumstances. A good monsoon and the recently announced GST reforms have contributed to this position.</p>.<p>The optimism is evident from the RBI’s projections and the comments made by Governor Sanjay Malhotra. The RBI now estimates that the Indian economy will grow at 6.8% in 2025-26 – this is higher than the 6.5% projection made in August. It has also made a downward revision of its inflation forecast for the current fiscal year, from 3.1% in August to 2.6%. The 6.8% growth rate projection is above expectations. When there is momentum in growth and the inflation is benign, there is no requirement for the RBI to deploy its monetary tools to effect an outcome. The MPC noted that the current macroeconomic conditions and the outlook have “opened up policy space for further supporting growth,” and that the decision to keep the repo rate unchanged was unanimous.</p>.RBI's decision to pause repo rates at 5.5% will help maintain home loan EMIs: Real estate experts.<p>The decision also marks a sense of caution on the part of the RBI in responding to the evolving domestic and international situation. The Donald Trump administration’s tariff war on the world and its heightened significance for India, the ongoing geopolitical tensions, and the volatility in the global financial markets pose serious risks to the growth outlook. The RBI Governor said the neutral stance would continue as there was still uncertainty over the tariffs, and a monetary policy transmission was underway. The MPC has given time for the earlier rate cuts to be transmitted to the economy. The pause decision may mean that the Committee has adopted a policy of wait and watch, and would act if the situation gets aggravated on the trade and tariffs front.</p>
