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RBI Keeps Repo Rate Steady at 5.50 Percent Inflation Risks Influence Policy
1 October 2025
RBI Holds Rates for 8th Straight Policy Review
The Reserve Bank of India (RBI) decided to keep the repo rate unchanged at 5.50%, marking the eighth consecutive policy where borrowing costs were left untouched. The Monetary Policy Committee (MPC) voted unanimously to maintain its stance of “withdrawal of accommodation”, signaling caution even as inflation trends closer to the central bank’s comfort zone.
The RBI’s move reflects a careful balance between inflation management and growth support, with Governor Sanjay Malhotra emphasizing stability in an uncertain global and domestic environment.
Inflation – Moderating but Still a Threat
Governor Malhotra highlighted that headline inflation is easing toward the 4% target, but warned of persistent risks from food and energy prices.
“We cannot afford to lower our guard. Inflation shocks, particularly in food and fuel, have the potential to derail stability,” Malhotra cautioned.
Food inflation, led by cereals and pulses, remains sticky, while global crude oil volatility driven by West Asian tensions continues to pose a challenge. The RBI reaffirmed its FY26 inflation forecast at 4.7%.
Growth Outlook Remains Strong at 6.5%
The central bank kept its GDP growth projection for FY26 at 6.5%, underpinned by robust investment activity, infrastructure expansion, and steady services exports.
Credit demand remains strong across both retail and corporate segments, reflecting confidence in India’s domestic investment cycle. However, Malhotra flagged risks from a global slowdown that could weaken export momentum.
“India’s domestic growth engine is resilient, but global spillovers cannot be ignored,” he said.
Market Reaction – Cautious Optimism
Indian financial markets responded positively, though without euphoria:
Equities: Banking and financial stocks edged higher on policy continuity, while IT and export-driven firms stayed cautious given global uncertainties.
Bonds: Yields softened slightly, signaling confidence that the RBI will avoid aggressive tightening.
Currency: The rupee held steady, supported by RBI’s active forex management assurances.
Analysts believe the policy gives corporates and lenders relief from near-term rate hike fears, though the timeline for rate cuts remains unclear.
Balancing Inflation and Growth
The October policy reaffirms RBI’s dual focus:
Inflation is easing but vulnerable to food and energy shocks.
Growth is holding firm, supported by capex and services demand.
Liquidity management will remain measured to avoid volatility.
Governor Malhotra summed it up:
“We are walking a fine line between supporting growth impulses and ensuring price stability. The priority remains durable disinflation, even as we enable the economy to expand on a sustainable path.”
Final Word
The RBI’s October policy underscores cautious optimism no rate cuts yet, but no tightening either. The stance signals patience, not pivot.
For investors, the key watchpoints remain global crude prices, monsoon-driven food inflation, and the US Fed’s policy path. Until these uncertainties clear, the RBI is set to prioritize stability over bold moves. Sources
Reserve Bank of India (RBI) – Monetary Policy Statement, October 2025, Governor’s post-policy press conference.
Monetary Policy Committee (MPC) Resolution, RBI, October 2025.
Market reaction coverage: Economic Times Markets, Business Standard, Mint, 15 September – 15 October 2025 editions.
