The Reserve Bank of India (RBI) left its key repo rate steady at 5.50% on Wednesday, in line with market expectations. The central bank chose to pause as it reviews the effects of earlier rate cuts and recent tax reliefs while keeping an eye on global trade tensions.

Earlier Cuts and Policy Stance

The RBI had already reduced the repo rate by 100 basis points earlier this year. In its August meeting, it decided not to make further cuts. This time too, the Monetary Policy Committee (MPC) voted unanimously to keep rates unchanged and maintain a neutral policy stance.

A Reuters survey had predicted this outcome. However, some economists argued that slowing growth and low inflation might push the RBI to ease further in the coming months.

Governor’s Statement

RBI Governor Sanjay Malhotra said inflation pressures have eased due to lower food prices and recent tax cuts. He also stressed that the outlook for economic growth remains steady.

Inflation in August stood at 2.07%, slightly higher because of food costs but still close to the lower end of the RBI’s 2–6% comfort range. This provides the central bank with flexibility if it needs to adjust policy in the future.

Growth Outlook

India’s economy grew by a robust 7.8% year-on-year in the April–June quarter. However, analysts expect growth to slow in the coming months. One reason is the effect of steep US tariffs—up to 50%—on Indian goods.

Even so, domestic demand could remain strong, helped by recent tax reductions on consumer products. Economists believe these measures may cushion the impact of weaker exports.