Key Highlights:
- Repo rate held at 5.5 percent after cumulative 100 bps cut in 2025.
- Inflation forecast for FY26 lowered to 3.1 percent.
- Retail inflation hits 6-year low in June, food prices in deflation.
Mumbai: The Reserve Bank of India (RBI) on Wednesday decided to keep the policy repo rate unchanged at 5.5 percent, halting its easing cycle after three successive rate cuts earlier this year. The central bank also retained its ‘Neutral’ policy stance, signaling a cautious approach amid lingering global uncertainties, particularly related to tariffs and trade.
Announcing the third bi-monthly monetary policy for FY26, RBI Governor Sanjay Malhotra said that the growth projection for the fiscal year remains unchanged at 6.5 percent, reflecting confidence in domestic recovery despite headwinds from the global economic environment.
Unanimous Decision by MPC
The Monetary Policy Committee (MPC), which comprises six members including the RBI Governor, voted unanimously to keep the repo rate unchanged. The decision came after a total 100 basis points (bps) rate cut since February 2025 — with 25 bps cuts in February and April, followed by a larger 50 bps cut in June.
Malhotra emphasized that while inflation remains well below the RBI’s 4 percent target, caution is warranted due to volatile global commodity prices and trade-related concerns.
Inflation Outlook Improves Further
In a positive development, the RBI lowered its inflation forecast for FY26 to 3.1 percent, down from its earlier projection of 3.7 percent. Retail inflation, measured by the Consumer Price Index (CPI), has been on a declining trend since February. In June, CPI inflation fell to a six-year low of 2.1 percent, supported by a sharp drop in food prices and a favorable base effect.
Food inflation, which makes up nearly half of the CPI basket, turned negative in June, registering -1.06 percent compared to 0.99 percent in May. The drop was broad-based across essential categories such as vegetables, cereals, pulses, milk, meat, and spices.
Composition of the MPC
The MPC includes three RBI officials — Governor Sanjay Malhotra, Deputy Governor Poonam Gupta, and Executive Director Rajiv Ranjan — along with three external members: Dr. Nagesh Kumar, Saugata Bhattacharya, and Prof. Ram Singh.
