RBI Keeps Key Lending Rate Unchanged At 5.5 Per Cent After Three Cuts Amid Trump's Tariff Threat

The Reserve Bank of India (RBI) has kept its repo rate unchanged at 5.5 per cent after three consecutive cuts as the rupee remains under pressure due to US President Donald Trump's tariff threat.

The rupee fell 16 paise yesterday, after Trump issued fresh threats to hike tariffs on Indian goods, NDTV reported.

The decision was announced at the Monetary Policy Committee (MPC) meeting on Wednesday (6 August).

In June, the RBI had cut the key rate by 50 basis points in line with the softening inflation.

Further, the Reserve Bank of India (RBI) has maintained its projection for India’s GDP growth at 6.5 per cent for 2025‑26, while lowering its inflation forecast to 3.1 per cent from the earlier estimate of 3.7 per cent, reported PTI.

Presenting the central bank’s third bi‑monthly monetary policy, Governor Sanjay Malhotra highlighted the positive impact of a favourable southwest monsoon, easing price pressures, increased capacity utilisation, and supportive financial conditions on the domestic economy.

He added that robust government capital expenditure, combined with accommodative monetary and fiscal policies, is expected to sustain momentum, particularly in the services sector, where construction and trade remain strong.

“Growth is robust and as per projections, though it is below our aspirations. The uncertainties of tariffs are still evolving. Monetary policy transmission is continuing. The impact of the 100 bps rate cut since February 2025 on the economy is still unfolding,” Malhotra noted.

While rural demand remains resilient, the RBI observed that urban consumption, especially discretionary spending continues to recover more slowly. Some high‑frequency indicators for May and June reflected mixed signals, suggesting uneven recovery.

On the global front, Malhotra warned that the headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook.

The RBI now expects quarterly growth in 2025‑26 to stand at 6.5 per cent in Q1, 6.7 per cent in Q2, 6.6 per cent in Q3, and 6.3 per cent in Q4, with Q1 2026‑27 projected at 6.6 per cent.

Inflation, meanwhile, has fallen sharply, with the Consumer Price Index (CPI) hitting a 77‑month low of 2.1 per cent in June, thanks largely to falling food prices.

Malhotra stressed that India’s economic rise would require stronger policy frameworks across domains, and not just limited to monetary policy.

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