RBI holds repo rate at 5.5% amid global tariff uncertainty

The Reserve Bank of India (RBI) on Wednesday maintained its policy interest rate at 5.5 per cent for the second consecutive review, citing uncertainties over global trade tariffs.

Announcing the fourth bi-monthly monetary policy of the current fiscal, RBI Governor Sanjay Malhotra stated that the Monetary Policy Committee (MPC) unanimously decided to keep the short-term lending rate, or repo rate, unchanged, while retaining a neutral monetary stance.

Governor Malhotra noted that while the rationalisation of GST rates is expected to moderate consumption and growth, developments related to tariffs may slow economic expansion in the second half of the fiscal year.

Since February 2025, the RBI has reduced the policy rate by a cumulative 100 basis points. In its previous policy review in June, the central bank had lowered the repo rate by 50 basis points to 5.5 per cent. Earlier reductions included cuts of 25 basis points each in February and April, following recommendations from the MPC in response to easing retail inflation.

The central bank has been mandated by the government to maintain Consumer Price Index (CPI)-based retail inflation at 4 per cent, with a permissible margin of two per cent on either side. Retail inflation has trended below 4 per cent since February 2025, reaching a six-year low of 2.07 per cent in August. This decline was supported by easing food prices and a favourable base effect.

The RBI’s decision to hold rates reflects a cautious approach amid domestic consumption concerns and external uncertainties, ensuring that inflation remains within the target range while monitoring economic growth dynamics.