RBI MPC decisions calibrated pause amid global fragility, domestic resilience: Economists

New Delhi:  The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 5.5 per cent, while sticking to the “neutral” monetary policy stance, RBI Governor Sanjay Malhotra said on Wednesday.

The RBI Governor said the decision was taken unanimously by the MPC after a detailed assessment of the macroeconomic situation and the growth-inflation dynamics.

The RBI’s MPC pegged India’s CPI inflation at 3.1 per cent for FY2025-26, as the steady progress of the monsoon and robust kharif sowing are expected to keep food prices in check.

At the same time, the central bank also retained its forecast for India’s GDP growth at 6.5 per cent for FY 2025-26, despite global uncertainties, as it expects strong rural demand on the back of a good monsoon and robust government expenditure on big-ticket infrastructure projects to propel growth.

Meanwhile, experts across the industries have welcomed the RBI’s decision, saying the move will strengthen the Indian economy amid unfavourable geopolitical situations.

Binod Kumar, MD and CEO, Indian Bank, said that the RBI’s decision was as per expectations and was a welcome move.

“As the RBI had front-loaded the rate cut, it was expected to maintain the status quo. It is a welcome move. However, it leaves room to reconsider in the coming months as CPI is benign and a push for growth may be required,” Kumar said.

“Despite sharply lowering its inflation forecast to 3.1 per cent from 3.7 per cent earlier, the RBI’s decision to keep rates steady emanates from their focus on one-year-ahead expected inflation that’s looking comfortably above 4 per cent, while growth in their view has held up well, despite global uncertainty,” said Madhavi Arora, Chief Economist, Emkay Global Financial Service.

Arsh Mogre, Economist at PL Capital, believes that the decision will help India in being resilient amid global uncertainties.

“RBI’s decision to hold the repo rate at 5.50 per cent was not merely an exercise in prudence, but it was a calibrated pause at the intersection of global fragility and domestic resilience. While headline inflation remains benign and June’s front-loaded 50 BPS cut still transmits through the system, the MPC appears acutely aware that downside risks to growth from tariff spillovers are not yet fully priced in,” Mogre said.

–IANS