The Reserve Bank of India’s (RBI) monetary policy committee (MPC) today kept the repo rate unchanged at 5.5% while continuing with the neutral stance, in line with analysts' expectations.

This comes after the MPC slashed the repo rate by 100 basis points through three successive rate cuts from February.

The impact of the 100-basis-point rate cut since February 2025 on the broader economy is still unfolding, said RBI Governor Sanjay Malhotra. "The current macroeconomic conditions, outlook and uncertainties call for the continuation of the policy repo rate of 5.5% and wait for further transmission of the front-loaded rate cuts to the credit market and the broader economy," he said.

Most analysts expected the RBI MPC to maintain the status quo this time after its massive 50 basis points cut during the previous meeting.

The MPC slashed the inflation forecast for the financial year 2025-26 to 3.1% from 3.7% earlier. The MPC noted that while headline inflation is much lower than projected earlier, it is mainly due to volatile food prices, especially in vegetables. Core inflation has remained steady at around 4%. Inflation is projected to go up from the last quarter of the ongoing financial year.

"CPI inflation is likely to edge up above 4% in Q4 FY26 as unfavourable base effects and demand side factors from policy actions that we took a few months ago come into play," said the RBI governor. Barring any major input shock to prices, core inflation is likely to remain moderately above 4% during the year, Malhotra said. "Weather-related shocks pose risks to inflation outlook. Considering all these factors CPI inflation for the current year 2025-26 is now projected at 3.1%, from 3.7% earlier," he added.

This comes against the backdrop of ongoing global uncertainty over US tariff policy.

“The monsoon season has been progressing well. We are also approaching the festival season which brings enthusiasm and buoyancy in the economic activity. This favourable setting together with supportive policies of the government and the Reserve Bank augurs well for the Indian economy,” said the RBI governor.

Over the medium term, the Indian economy holds bright prospects in the changing world order, drawing on its inherent strength of robust fundamentals and comfortable buffers, he added.

The MPC retained its real GDP growth forecast for FY26 at 6.5%.

The above-normal southwest monsoon, lower inflation, rising capacity utilisation and congenial financial conditions continue to support domestic economic activity, said the MPC. The supportive monetary, regulatory and fiscal policies including robust government capital expenditure should also boost demand, the MPC noted, adding that the services sector is expected to remain buoyant, with sustained growth in construction and trade in the coming months.

Prospects of external demand, however, remain uncertain amidst ongoing tariff announcements and trade negotiations. The MPC warned that the headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook.

Ahead of the Reserve Bank of India’s Monetary Policy Committee, the finance ministry’s June Monthly Economic Review stated that the core inflation of the country will remain subdued, as overall inflation remains comfortably below the RBI’s 4% target. The ministry stated that this makes room for an easing cycle to be sustained.