RBI’s Monetary Policy Committee Maintains Interest Rates

• The RBI’s monetary policy committee unanimously voted to keep the benchmark policy repo rate at 5.5%.

• The decision was expected given the current global and domestic environment.

• RBI Governor Sanjay Malhotra emphasized the need for continuation of the policy due to the current macroeconomic conditions, outlook, and uncertainties.

• The central bank’s forecasts indicate that inflationary pressures in the economy are expected to remain muted.

• The RBI’s inflation forecast for the year has been lowered to 3.1% from 3.7% earlier.

• Core inflation, which excludes food and fuel, has inched upwards to 4.4% in June.

• However, the central bank’s forecasts have pegged inflation to rise to 4.4% in the fourth quarter of 2025-26 and further to 4.9% in the first quarter of 2026-27.

• The central bank has retained its projections of economic growth at 6.5% this year, despite the global environment changing considerably since then.

• Further policy action will depend on whether growth and/or inflation deviate significantly from the central bank’s current assessment.