RBI blinks, pauses rate cuts

Mumbai: The Reserve Bank of India kept its benchmark interest rate unchanged on Friday, as expected, as inflation remained at manageable levels, and growth concerns eased following trade agreements with the US and the European Union.

The central bank’s six-member Monetary Policy Committee (MPC) voted unanimously to keep the repurchase, or repo rate, at 5.25 per cent. The RBI retained its neutral policy stance, signalling rates will stay low for some time. US President Donald Trump earlier this week announced a cut in tariffs on Indian goods to 18 per cent from 50 per cent, easing a key pressure point on India’s economy and markets. The first tranche of the pact is likely to be finalised by next month, which includes a reduction in US tariffs. External headwinds have intensified, but the successful completion of the trade deal with the US bodes well for the economy, he said.

The RBI has cut rates by a total of 125 basis points since February 2025, marking its most aggressive easing cycle since 2019. It reduced rates by 25 basis points at its previous meeting in December. While the inflation remains benign, economic activity remains resilient. Future rate moves will depend on growth outlook and inflation, he said. “Whether they will go down even further, I will leave it for the MPC to decide going forward,” he said.

As to policy transmission on the deposit side, he said transmission happens at a slower pace. “It has improved. It is improving after every policy statement. We are hopeful that they will further continue to improve,” he said. “The real rate of interest today is very low. Going forward, we are in an accommodative phase.” Malhotra said no assessment has been done on how much the trade deal will contribute to the GDP growth because details are not available. “We have added 20 basis points to GDP growth because of various reasons, including the US trade deal.”

“The Indian economy continues to register high growth despite a challenging external environment clouded by geopolitical uncertainties. Benign inflation provides the leeway to remain growth-supportive while preserving financial stability. We remain committed to meeting the productive requirements of the economy and sustaining the growth momentum,” he added.