RBI keeps repo rate unchanged at 5.5% amid Trump tariff threat

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) on Wednesday (Aug 6) decided to keep the policy repo rate unchanged at 5.5 per cent, announced RBI Governor Sanjay Malhotra, adding that the neutral stance will continue. The decision was taken after a careful review of the latest economic and financial conditions by the MPC on the 4th, 5th, and 6th of August. “...Over the medium term, the Indian economy holds bright prospects in the changing world order, drawing on its inherent strengths…”, said Malhotra, adding that the decision to keep the Liquidity Adjustment Facility at 5.5 per cent was taken unanimously by the six MPC members.

Governor Malhotra noted that the economic outlook looks positive and said, “The monsoon season is progressing well, and the upcoming festival season usually increases economic activity. Combined with supportive government and RBI policies, this situation bodes well for the Indian economy in the near term.”

RBI breaks its streak

By keeping the repo rate unchanged, the RBI has broken its streak. This is the first time since December 2024 that the Indian central bank has kept the rate unchanged. Previously, at RBI's June policy meeting, the MPC had reduced the repo rate by 50 basis points, bringing it to the current 5.5 per cent. At the time, the reason for the rate cut was stated as the easing of inflation.

Retail inflation lowest in six years

Retail inflation in India has continued to fall and has now reached its lowest level in over six years, reports ANI. According to the Ministry of Statistics, the year-on-year inflation rate based on the Consumer Price Index (CPI) for the month of June was 2.10 per cent (provisional). This was a drop of 72 basis points compared to May 2025. It also happens to be the lowest CPI inflation rate since January 2019.
Food prices have also dropped. June's Consumer Food Price Index (CFPI) registered a year-on-year inflation rate of (-) 1.06 per cent (provisional). Meanwhile, in rural areas, the food inflation rate was (-) 0.92 per cent, and in urban areas, it was (-) 1.22 per cent. Negative wholesale inflation has also been observed. The Ministry of Commerce and Industry reported that the Wholesale Price Index (WPI) for June was (-) 0.13 per cent, a decrease from May's 0.39 per cent. The negative WPI was attributed to decreased prices in food items, mineral oils, basic metals, crude petroleum, and natural gas.