The Reserve Bank of India (RBI) on Wednesday decided to keep the repo rate unchanged at 5.5 per cent, with the monetary policy committee (MPC) maintaining a “neutral” policy stance.
A neutral stance implies that the central bank neither seeks to stimulate the economy nor tighten liquidity, balancing efforts to control inflation without impeding growth.
RBI Governor Sanjay Malhotra said the inflation outlook has become more benign due to a sharp decline in food prices and recent GST rate cuts. The RBI has revised its average inflation projection for 2025-26 to 2.6 per cent from the 3.1 per cent projected in August.
On growth, the MPC has raised its GDP forecast for the financial year to 6.8 per cent from 6.5 per cent earlier, citing robust domestic demand, a good monsoon, the impact of earlier monetary easing, and GST rate reductions.
The Governor noted that the central bank is waiting for the effects of previous policy measures to fully play out and for trade-related implications to unfold. “It would be prudent to wait for the policy actions to play out before charting out the next round of monetary policy actions,” he said.
Since February this year, the RBI has reduced the repo rate by 100 basis points. Lower rates, combined with increased liquidity, are expected to reduce borrowing costs for consumers and businesses, encouraging consumption and investment. The effectiveness of these cuts, however, depends on how efficiently commercial banks transmit the benefits to borrowers.
-IANS