RBI MPC Keeps Repo Rate Unchanged At 5.5% Amid Outrage Over Trump Tariff Threat

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday announced the central bank's decision to keep repo rate under the liquidity adjustment facility unchanged at 5.5 per cent. The decision comes amid stir over US President Donald Trump's tariff threat against India. Some had speculated that the MPC might announce a final 25 basis point rate cut before an extended period of unchanged rates.

The RBI retained the GDP growth projection for the current fiscal year at 6.5 per cent while lowering the inflation forecast to 3.1 per cent from 3.7 per cent.

The RBI's MPC, led by Governor Malhotra, began its three-day meeting on Monday, August 4, and it concluded on August 6. The six-member committee included, Governor Sanjay Malhotra, Deputy Governor Poonam Gupta, Executive Director Rajiv Ranjan and three external members, Nagesh Kumar, Saugata Bhattacharya and Ram Singh. This was Governor Malhotra's fourth rate announcement since he succeeded Shaktikanta Das.

ALSO READ: RBI MPC Meet To Trump Tariffs: Key Factors Behind Stock Market's Dramatic Fluctuations

Recent Monetary Policy Actions

The MPC previously cut the repo rate in February, April, and June 2025, bringing it down to 5.5 per cent. The central bank also shifted its stance from 'accommodative' to 'neutral'. In response, banks have lowered their external benchmark-linked rates (EBLRs) and marginal cost of funds-based lending rates (MCLRs).

The RBI's surprise move in June 2025 to cut the repo rate and reduce the Cash Reserve Ratio (CRR) was a strong signal of its confidence in controlling inflation. In the previous policy review, the RBI had announced a 50 basis point repo rate cut, bringing the key policy rate down to 5.5 per cent, and a 100 basis point CRR reduction. The RBI had cut the repo rate by 100 basis points in three consecutive rate cuts.

ALSO READ: Rupee Weakens Against US Dollar Amid Trade Tariffs And Russian Oil Imports; RBI Intervenes

Inflation Outlook

Consumer price inflation is at a six-year low, which could provide the RBI with a rationale for further rate cuts. The central bank's goal is to fix the inflation rate at 4 per cent, with a tolerance limit of +/- 2 per cent.

In its June 2025 policy review, the RBI revised its retail inflation projection for the fiscal year (FY26) down to 3.7 percent from an earlier forecast of 4 percent. This marks the lowest average retail inflation forecast by the central bank in recent years.

The Reserve Bank of India (RBI) brought some good news for the consumers. The average pace of price increases, measured by the Consumer Price Index (CPI) inflation for a basket of goods, is now projected to be slower in the 2025-2026 fiscal year, at 3.1% instead of the previously forecasted 3.7%. This means that consumers will have slightly more purchasing power.

However, the governor has also cautioned that this positive trend may not last. Inflation is expected to rise by the end of the year, with the prices of food and fuel likely to continue increasing at a moderate pace of over 4% throughout the year.

“The RBI’s decision to hold the repo rate at 5.5% with a neutral stance reflects a cautious yet supportive approach towards economic recovery. While an additional rate cut could have further accelerated housing demand, the stability in policy still reinforces buyer confidence—especially with retail inflation well within target levels. The impact of previous rate cuts is still playing out, and we expect this consistent stance to encourage fence-sitters to take decisive steps towards home ownership during the festive season,” said SS Group CEO and MD,Ashok Singh Jaunapuria.