On Wednesday, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), led by Governor Sanjay Malhotra, said that the main repo rate would stay at 5.50%. This is a break in the central bank’s cycle of lowering interest rates, which saw three cuts in a row earlier this year. The six-member committee all agreed on the decision.
The MPC also kept its “Neutral” policy position, which means it is ready to either cut or raise rates depending on what new economic data comes in. Governor Malhotra said that the decision to keep the rate unchanged was made so that the full effects of the previous “front-loaded” rate decreases (a total of 100 basis points since February 2025) could be seen throughout the economy.
The announcement comes while the economy is sending mixed signals. Even while growth in the US is still strong, there are still a lot of unknowns across the world, such the US tariffs on Indian goods that were just announced. The MPC said that several high-frequency indicators were mixed in May and June, but rural consumption is still strong, while urban consumption, especially discretionary expenditure, is still weak.
The RBI’s decision was also affected by inflation. The Consumer Price Index (CPI) shows that retail inflation has gone down a lot, reaching its lowest level since January 2019 at 2.1% in June 2025. The central bank, on the other hand, thinks it’s best to wait for additional information before making any more changes. The RBI has also kept its prediction for GDP growth this fiscal year at 6.5%.
The decision means that interest rates will probably stay the same for now, which is good news for borrowers, especially those with loans tied to the repo rate. Some experts thought that the RBI would lower rates again to encourage credit expansion before the holidays, but the bank has decided to take a cautious “wait and watch” approach to see how the economy is doing at home and throughout the world.