RBI keeps repo rate unchanged at 5.5%, revises GDP forecast to 6.8%

Governor Sanjay Malhotra projects softer inflation from GST cuts and food prices

The Reserve Bank of India (RBI) kept its key repo rate unchanged at 5.50 per cent on Wednesday, while signaling there may be scope to ease in coming months to support an economy taking a hit from US tariffs.

 

The central bank had cut the repo rate by a total of 100 basis points in the first half of 2025, but paused at its previous meeting in August. The six-member rate-setting panel voted unanimously to keep the key repo rate at 5.50 per cent and decided to continue with a "neutral" policy stance.

 

“Growth–inflation dynamics have shifted since the August monetary policy. The rationalisation of GST [Goods and Services Tax] is expected to have a dampening effect on inflation,” said RBI Governor Sanjay Malhotra in his monetary policy statement.

 

The central bank revised its inflation forecast for the financial year ending March 2026 to 2.6 per cent, down from 3.1 per cent projected in August, citing a continued decline in food prices and headline inflation remaining well below the target.

 

It raised the growth forecast for the current financial year to 6.8 per cent compared with its previous estimate of 6.5 per cent.

 

India’s retail inflation, measured by the Consumer Price Index, rose to 2.07 per cent in August 2025 from 1.61 per cent in July. While low inflation benefits consumers, recent cuts in GST rates are expected to further reduce the inflation print by up to 90 basis points this financial year.

 

“The overall inflation outlook has turned notably more benign in recent months, with headline inflation being revised down from 3.7 per cent in June to 3.1 per cent in August, and further to 2.6 per cent most recently,” Malhotra said.