By Swati Bhat and Abinaya V
MUMBAI (Reuters) -The Reserve Bank of India (RBI) kept its key repo rate unchanged at 5.50% on Wednesday, in line with market expectations, as it evaluates the impact of earlier rate cuts and recent tax reductions amid global trade uncertainties.
The central bank had cut the repo rate by a total of 100 basis points in the first half of 2025, but paused at its previous meeting in August.
The six-member rate-setting panel voted unanimously to keep the key repo rate at 5.50% and decided to continue with a “neutral” policy stance.
A Reuters poll had predicted rates would remain on hold, although some economists highlighted subdued inflation and risks to growth as reasons for a potential cut.
India’s benchmark 10-year bond yield was 2 bps higher at 6.6038%, while the rupee was marginally firmer at 88.75 and equity indexes were slightly stronger.
WAIT AND WATCH
The rate panel considered it prudent to wait for the impact of several policy changes to play out before charting the next course of action, Reserve Bank of India Governor Sanjay Malhotra said in a video address.
Past rate cuts and recently announced tax cuts on consumer items will have a positive impact on demand while punitive trade tariffs imposed by the U.S. on India will hurt exports.
The central bank raised its GDP growth forecast for the current year to 6.8% compared with its previous estimate of 6.5%.
The Indian economy grew at a stronger-than-expected 7.8% in the April-June quarter from a year earlier.
The RBI expects inflation in the current financial year to come in at 2.6%, lower than its previous estimate of 3.1%.
The MPC said the outlook on inflation has turned more benign due to lower food prices and tax rate cuts, Malhotra said in his statement. The growth outlook remains resilient, he said.
India’s annual inflation accelerated to 2.07% in August as food prices inched higher, but remained close to the lower end of the central bank’s 2%-6% tolerance band, leaving room for rate cuts.
(Reporting by Swati Bhat and Abinaya V., Editing by Jacqueline Wong and Mrigank Dhaniwala)
