RBI Governor Sanjay Malhotra informs about the policy rates staying unchanged due to the global uncertainty
The Reserve Bank of India's Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, stated today that the repo rate is to stay at 5.5%. This follows a year that saw three successive cuts of 100 basis points, including a deep 50 bps reduction in June 2025. The policy stance of the central bank remains 'neutral', indicating that future policy steps will be determined by changing economic circumstances as opposed to a predetermined trajectory.
Fresh evidence has encouraged the MPC's resolve to keep rates high. Retail inflation dropped steeply to a six-year low of 2.1% in June, leaving a comfortable policy window for the RBI. In parallel, India's economy has exhibited resilience, with forecast GDP growth in FY26 still strong at 6.5%. The first quarter of the fiscal witnessed the economy growing at a 7.4% clip, backed by a pickup in manufacturing activity as evidenced by a PMI of 59.1 in July.
In spite of positive domestic circumstances, the international environment is still plagued by challenges. The US levying of a 25% tariff on Indian exports has increased external risk and made India's policy environment more difficult. These trade tensions, as well as international monetary policy changes, have fueled capital flow volatility and unsettled external demand. Governor Malhotra stressed that, in such a situation, the RBI is focused on achieving a balance between supporting domestic growth and protecting the economy from international shocks.
Analysts universally predicted this move, warning that though inflation is way below the RBI's medium-term target, responding too early to additional easing risks backfiring if risks out of the country materialise. The RBI is now taking a "wait and watch" stance, monitoring festive season demand and its progress in trade negotiations before contemplating further easing.
With banks still to transmit the cumulative rate cuts fully to borrowers, today's timeout gives markets and consumers a breathing space. Market participants waited anxiously for Governor Malhotra's words on forward guidance. He reaffirmed the central bank's intent to be guided by data, any additional monetary accommodation, he said, would hinge on the development of inflation and growth dynamics in a volatile global context.
In short, the August 2025 RBI MPC meeting reflects both the central bank's guarded optimism regarding India's growth outlook and its determination to handle global headwinds judiciously. The steady repo rate guarantees continuity in policy and communicates a powerful message: though domestic fundamentals are healthy, India's central bank stands ready to act with forbearance in a volatile global age.
