MPC keeps repo rate at 5.50%, maintaining a neutral monetary stance
SDF at 5.25%, MSF and bank rate held at 5.75%, CRR unchanged at 3.00%
Real GDP growth for FY26 projected at 6.5%, aided by robust southwest monsoon
Core inflation firm at 4.0%, headline risks persist from food and fuel volatility
The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday voted unanimously to keep the key policy repo rate unchanged at 5.50%, ending a succession of rate cuts earlier this year.
In a press briefing following the meeting, Governor Sanjay Malhotra announced the stance to be “neutral”, as the central bank balances growth support with inflation containment.
Key Policy Rates
The committee opted to maintain all key policy rates at their existing levels: the repo rate was held steady at 5.50%, while the standing deposit facility (SDF) rate remained at 5.25%. The marginal standing facility (MSF) rate and the bank rate continued unchanged at 5.75%, and the cash reserve ratio (CRR) was kept at 3.00%.
Governor Malhotra noted that while headline inflation has moderated somewhat, core inflation remains firm at 4.0%, warranting a cautious approach. “Inflationary pressures are expected to remain elevated in the near term,” he said, pointing to food and fuel price volatility and global uncertainties as risks. A robust southwest monsoon and favorable agricultural outlook, however, continue to underpin domestic growth prospects.
Growth & Inflation Projections
Real GDP growth for FY26 is projected at 6.5%, with quarterly estimates of 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.
Inflation is expected to remain within the RBI’s target band of 4% plus or minus 2%, although the committee underscored the need to stay vigilant against potential upside risks.
This policy decision follows a 50 basis-point cut in June, the third reduction since February, undertaken to cushion the economy against global trade tensions, tariff uncertainties, and slowing export demand. By holding rates now, the MPC aims to ensure that the monetary stimulus provided earlier does not stoke further inflationary pressures.
Anuj Puri, Chairman, ANAROCK Group said, “….A rate cut leading to lower interest rate environment would have particularly boosted the affordable housing segment, which has been under considerable pressure in recent years…..That said, overall, homebuyers are currently driven by long-term confidence rather than short-term rate fluctuations. Given the upcoming festive season, developers may look to keep the market momentum going with offers and flexible payment plans, which may help improve affordability for many genuine buyers.”
