Central bank pauses after 125 bps rate cuts, weighs Budget push and India–US trade deal impact
The Monetary Policy Committee (MPC) of the Reserve Bank of India on Friday decided to keep the benchmark repo rate unchanged at 5.25 per cent, while retaining a “neutral” policy stance, citing a resilient economy amid evolving macroeconomic conditions.
Announcing the decision, RBI Governor Sanjay Malhotra said the Indian economy remains on a strong footing, supported by stable domestic demand and improving investment activity, even as global uncertainties continue to pose risks.
“The MPC will remain watchful and be guided by evolving macroeconomic conditions, particularly the new series of GDP and inflation data,” the governor said, underlining the central bank’s data-dependent approach going forward.
The decision marks a pause after cumulative rate cuts of 125 basis points since February 2025, as the central bank assesses the impact of earlier easing measures on growth and inflation. While inflation has moderated from recent peaks, price pressures remain sensitive to food inflation, global commodity prices, and geopolitical developments.
The RBI reiterated that its policy focus continues to be on aligning inflation sustainably with the medium-term target of 4 per cent, while supporting growth. The neutral stance, the central bank said, provides flexibility to respond to incoming data without committing to a pre-set policy path.
Market participants broadly expected the status quo, given mixed signals on inflation and uneven monetary transmission. Analysts said the RBI’s emphasis on the new GDP and inflation series indicates that future policy moves will hinge on how revised data reshape the growth-inflation outlook.
The central bank also took note of recent domestic developments, including fiscal signals from the Union Budget and progress on external trade engagements, which are expected to support medium-term growth prospects.
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