On August 6, the Reserve Bank of India (RBI), led by Governor Sanjay Malhotra, decided to keep the repo rate unchanged at 5.5%, as expected by market experts. The central bank also kept its policy stance ‘neutral’ while closely monitoring global developments, especially rising trade tensions with the United States.
This move was widely predicted by economists, as inflation in India remains under control. In fact, June CPI inflation was just 2.1%, well below the RBI’s upper target range. This marks five consecutive months of inflation staying low.
The RBI kept its GDP growth forecast steady at 6.5% for FY26, but concerns remain over the global environment. The central bank is watching closely as US President Donald Trump has announced 25% tariffs plus penalties on Indian exports, especially due to India’s continued oil trade with Russia.
Analysts believe such trade penalties from the US could reduce India’s growth by up to 30 basis points, depending on how the situation develops.
In the previous June policy meeting, the RBI surprised markets with a 50 bps rate cut, bringing down the repo rate by 100 bps in total since February. However, this time the RBI has chosen a “wait and watch” strategy due to uncertainty in global trade dynamics.
Some economists were in favour of a rate cut to boost credit and festive season spending. But with global risks rising, the RBI preferred to hold back for now.
Experts believe that if the US tariffs actually come into effect, it may push the central bank to reconsider its stance in the next policy review.
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Source: Moneycontrol
News Desk
