- Decision
- Maintain
- Rate change
- 0 bps
- policy repo rate
- 5.5%
The Reserve Bank of India’s Monetary Policy Committee kept the policy repo rate at 5.50 per cent on 1 October 2025, with the standing deposit facility and marginal standing facility rates steady at 5.25 per cent and 5.75 per cent respectively, and retained a neutral stance, citing a considerably softer inflation trajectory alongside resilient—though externally challenged—growth prospects. Following 75 bp of rate cuts between April and June and an August pause, the Liquidity Adjustment Facility corridor stays at ±25 bp around the repo rate and no fresh liquidity measures were announced. Headline CPI inflation fell to an eight-year low of 1.6 per cent y-o-y in July before edging up to 2.1 per cent in August; the MPC now sees 2025-26 inflation averaging 2.6 per cent (Q4: 4.0 per cent), well within the 4 ±2 pp target band, while core inflation held at 4.2 per cent in August. Real GDP grew 7.8 per cent y-o-y in Q1 2025-26 and is projected at 6.8 per cent for the full year, supported by robust monsoon-driven rural demand, strong services activity and rising capacity utilisation, though tariff uncertainty, geopolitical tensions and global financial market volatility cloud the export outlook. The MPC will monitor the pass-through of earlier easing and evolving trade developments before “charting the next course of action,” with two members favouring a shift to an accommodative stance.
Rate evolution
From June 2025 to August 2026, the Reserve Bank of India lowered the policy repo rate by 75 basis points from 6.00 per cent to 5.25 per cent, front-loading a 50 basis point cut in June, pausing through October, easing again in December and then holding from February through August. The June move reflected sharply softer CPI inflation, a revised-down inflation outlook seen durably aligned with the 4 per cent target and likely to undershoot it marginally, alongside growth that remained below aspirations in a challenging global environment, after which the Monetary Policy Committee shifted the stance to neutral, citing limited remaining space and the need to assess incoming data. The subsequent pause came even as headline inflation turned more benign on food-price disinflation, Goods and Services Tax rate rationalisation and favourable monsoon conditions, because core inflation stayed around 4 per cent, base effects were expected to lift headline inflation later in 2025-26, and the committee wanted more clarity on the transmission of earlier rate cuts and fiscal measures as tariff, trade and geopolitical uncertainties clouded the external outlook.
The Reserve Bank of India cut the policy repo rate by 25 basis points in December as exceptionally benign food prices and subdued underlying inflation gave room to support growth, but held it at 5.25 per cent in February, judging the level appropriate amid resilient domestic growth and an inflation outlook still near target, while flagging external headwinds and commodity-price, weather and geopolitical risks. In April, the committee left the policy repo rate unchanged and maintained the neutral stance as contained headline inflation and muted core pressures were offset by rising energy, weather, supply-chain and second-round inflation risks from the West Asia conflict, and it held again in June as the conflict continued, domestic demand remained resilient and higher fuel and input costs, a sub-normal south-west monsoon forecast and El Niño risks warranted greater clarity. At its August 3 to 5 meeting, the committee unanimously kept the policy repo rate at 5.25 per cent and retained the neutral stance, noting that headline CPI inflation had moved above target mainly because of food and fuel without becoming broad-based, while core inflation excluding precious metals remained benign and growth stayed resilient, but uncertainty over the south-west monsoon, El Niño, geopolitics and global trade policy required more clarity on inflation’s path and composition before any policy action.