RBI Keeps Repo Rate at 5.5%, Aims to Balance Prices and Growth

In its latest monetary policy review, the Reserve Bank of India (RBI) has decided to keep the repo rate steady at 5.5%, signalling a neutral approach as it seeks to strike a balance between managing inflation and supporting economic recovery. The decision was made unanimously by the Monetary Policy Committee (MPC) after reviewing current economic trends.

RBI Governor Sanjay Malhotra explained that while overall inflation has come down, the central bank remains cautious due to continued fluctuations in food prices, especially vegetables. He added that core inflation, which excludes volatile items like food and fuel, has been stable at around 4%, giving the RBI some room to maintain its current policy.

The Governor expressed confidence in India’s growth prospects, noting that a favourable monsoon season, upcoming festival demand, and the impact of earlier rate cuts are expected to give a boost to the economy. He emphasized that the transmission of rate cuts by banks to customers remains a key factor for the policy to work effectively.

In its previous policy meeting in June, the RBI had reduced the repo rate by 50 basis points and also lowered the Cash Reserve Ratio (CRR) by 100 basis points, aiming to infuse liquidity and encourage lending. These steps were part of a broader effort to revive consumption and investment.

By keeping the repo rate unchanged this time, the RBI has signalled that it will wait and watch how the economy responds to past measures before making further moves. A neutral stance also means the central bank is keeping its policy flexible, with no immediate plans to either raise or reduce interest rates further.

Governor Sanjay reaffirmed the RBI’s commitment to price stability and sustainable growth, noting that any future policy actions will depend on how inflation and economic indicators evolve. The RBI will continue to closely monitor both domestic and global developments in the coming months.