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RBI Keeps Repo Rate Steady at 5.50%, Cuts Inflation Forecast Amid Global Trade Risks

Prime Highlights

  • RBI maintains repo rate unchanged at 5.50%, takes neutral stand in the face of global uncertainty.
  • Inflation projection reduced to 3.1% for FY26; GDP growth projection maintained at 6.5%.

Key Facts

  • Retail inflation dipped to a 6-year low of 2.1% in June, leading RBI to reduce inflation projection.
  • RBI cites rising trade tensions and US tariffs as key risks to economic stability.

Key Background

In its August 6, 2025, review of financial policy, Reserve Bank of India( RBI) maintained the repo rate at 5.50, after consecutive rate cuts in the first half of the time amounting to 100 base points. The Monetary Policy Committee( MPC) unanimously chose a neutral station, out of caution in light of recent global trade pressures and the need to observe the full impact of former rate reductions.

Governor Sanjay Malhotra said that transmission of the rate cut of June, particularly to retail and housing loans, is yet to be seen. He claimed that the central bank is eager to wait and see the transmission before there is any action. The RBI also reiterated that it is eager to have sufficient liquidity in the financial system, with recent times operations pumping average excess liquidity of approximately ₹3 lakh crore.

Among the significant policy takeaways was lowering FY2025‑26 inflation forecast to 3.1%, from 3.7%. This follows a sharp decline in retail inflation to a six-year low of 2.1% in June. Inflationary pressures in food and fuel remain a concern for the central bank during the second half.

On the growth side, the RBI did n’t revise its GDP estimate to 6.5, fuelled by strong domestic demand and steady macroeconomic pointers. But it advised against rising global headwinds, substantially tariff threat from the United States and stewing geopolitical pressures. These external impulses could affect exports and add to the pressure on India’s growth instigation, and it’s over to the RBI to keep watch.

Overall, the RBI move is a balancing act between sparking economic growth and protecting oneself from external shocks and inflation while leaving room for policy under the circumstances of uncertainty in the world economy.

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