RBI Maintains Repo Rate at 6.5% Amid Inflation Worries

The Reserve Bank of India (RBI) has decided to maintain the repo rate—the rate at which the central bank lends to commercial banks—at 6.5%, signaling a continued cautious approach in the face of persistent inflationary pressures and uncertain global economic conditions.

Announcing the outcome of the bi-monthly Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das said that while core inflation (which excludes food and fuel) has shown signs of easing, emerging risks—such as a surge in global crude oil prices, ongoing geopolitical tensions, and volatility in currency markets—continue to pose challenges to India’s macroeconomic stability.

“The MPC’s decision reflects our commitment to ensuring that inflation remains within the target band over the medium term while also supporting economic growth,” Das stated. He added that the RBI’s approach remains “data-dependent” and aimed at anchoring inflation expectations in an environment of global headwinds.

The decision to hold the rate was supported by a 5-1 majority within the six-member committee, with one member favoring a rate hike. This outcome highlights a slightly hawkish tilt within the committee, indicating that while there is no immediate tightening, the RBI remains vigilant and prepared to act if inflationary trends worsen.

The central bank’s inflation forecast for the remainder of the fiscal year stands at 5.4%, still above the medium-term target of 4%, but within the RBI’s acceptable range of 2–6%. Growth, meanwhile, continues to show resilience, with GDP projected to expand by 6.8% in FY 2025-26, supported by strong domestic demand, a robust services sector, and improved rural activity due to a normal monsoon.

However, risks to the inflation outlook remain elevated. A spike in global energy prices, supply chain disruptions, and depreciation in the Indian rupee could feed into higher import costs and pose a risk to price stability. The RBI also acknowledged the impact of external monetary tightening, particularly by the US Federal Reserve, which has kept global financial markets on edge.

Market participants widely expected the status quo, and the RBI’s cautious tone suggests it is unlikely to ease policy in the near term. Bond yields remained largely stable following the announcement, while equity markets reacted positively to the central bank’s balanced stance.

With inflation still a key concern, the RBI's message is clear: price stability remains the foundation of sustainable growth, and any premature easing of monetary policy could risk undoing the progress made so far.