In a move widely anticipated by economists, the Reserve Bank of India (RBI), under the leadership of Governor Sanjay Malhotra, decided to keep the repo rate unchanged at 5.5% during its August 2025 Monetary Policy Committee (MPC) meeting.
This is the fifth consecutive pause, as the central bank continues to balance between domestic inflation stability and external volatility, particularly from the U.S., where Donald Trump’s protectionist rhetoric has once again triggered fears of tariff-led disruption.
🔍 Global Headwinds, Local Optimism
While global markets remain jittery due to Trump’s proposed tariffs on Asian exports, the RBI is signaling confidence in India’s growth resilience. Governor Malhotra reassured stakeholders that India’s GDP forecast for FY26 remains unchanged at 6.5%, citing strong domestic consumption, infrastructure spending, and private investments.
He emphasized, “India is well-positioned to navigate external risks, thanks to prudent fiscal management and a robust financial sector.”
📉 Inflation, Liquidity and the Road Ahead
Inflation, which had spiked due to volatile food prices earlier this year, is expected to average 4.7% for FY26, staying within the RBI’s 2–6% comfort range. The central bank reiterated its “withdrawal of accommodation” stance to ensure inflation returns to the 4% target.
Liquidity management measures include variable rate reverse repo auctions, aiming to suck out surplus liquidity without stifling credit growth.
📈 Market Reaction
Markets responded with cautious optimism. The Nifty 50 rose by 120 points post-announcement, while 10-year bond yields edged lower, reflecting confidence in the RBI’s growth-inflation balancing act.