The Reserve Bank of India’s Monetary Policy Committee on Wednesday decided to keep the repo rate unchanged at 5.5%.

This came after three consecutive rate cuts since February.

The repo rate is the interest rate at which the central bank lends money to commercial banks. The Monetary Policy Committee reviews the rate every two months.

In June, the committee had cut the repo rate by 50 basis points, lowering it from 6% to 5.5%. The rate was reduced by 25 basis points each in April and February.

A basis point is one-hundredth of a percentage point. Basis points are used to describe the percentage change in the value of a financial instrument.

Central banks usually reduce repo rates to stimulate economic growth by making borrowing cheaper for individuals and businesses. This translates to lower equated monthly instalments for borrowers.

Reserve Bank of India Governor Sanjay Malhotra said on Wednesday that the committee decided to keep its monetary policy stance as “neutral” in view of uncertainties about tariff announcements and current macroeconomic conditions.

A neutral stance means that the Reserve Bank remained flexible in adjusting policy rates based on prevailing economic conditions. In contrast, a withdrawal of accommodation is a restrictive stance where the central bank aims to reduce the money supply in the economy by increasing interest rates to curb inflationary pressures.

On July 30, United States President Donald Trump said that his country will levy a 25% tariff on goods imported from India, as well as an unspecified “penalty” for buying military equipment from Russia amid the war on Ukraine.

On August 5, Trump said New Delhi has “not been a good trading partner” and that he was going to raise the tariffs imposed on goods imported from India “very substantially” within the next 24 hours.

Amid Trump’s threats to raise tariffs, the rupee on Tuesday fell 16 paise to close at 87.82 against the US dollar, PTI reported.

New Delhi has said that the targeting of India by Washington and the European Union for importing oil from Russia was “unjustified and unreasonable”.

India’s Ministry of External Affairs stated that the nations criticising India are “themselves indulging in trade with Russia”.

Growth projections unchanged at 6.5%

Reserve Bank of India Governor Sanjay Malhotra on Wednesday announced that the projections for the gross domestic product in the financial year 2025-’26 remain unchanged at 6.5%.

The governor also said that the central bank has lowered its Consumer Price Index inflation projection for FY2026 to 3.1%, down from the previous 3.7% forecast in June.

He highlighted that headline Consumer Price Index inflation fell for the eighth consecutive month in June, reaching a 77-month low of 2.1%. This was largely driven by a decline in food inflation, ANI reported.