RBI Keeps Rates Steady: Good News for Investors?: RBI Holds Repo Rate at 5.5% in August 2025 Policy Amid Record-Low Inflation and Steady Growth

The Reserve Bank of India (RBI), in its 56th Monetary Policy Committee (MPC) meeting held from August 4 to 6, 2025, kept the repo rate unchanged at 5.5%, pausing further easing after 100 basis points of rate cuts earlier this year. The decision reflects the RBI’s cautious approach as it balances historically low inflation with the need for sustained monetary transmission and global uncertainties.

The MPC, led by Governor Shri Sanjay Malhotra, voted unanimously to maintain a neutral policy stance. The Standing Deposit Facility (SDF) remains at 5.25%, and the Marginal Standing Facility (MSF) and Bank Rate at 5.75%.

Headline inflation dropped to a 77-month low of 2.1% in June, primarily due to food price deflation. However, core inflation rose to 4.4%, suggesting underlying demand pressures. The RBI projects CPI inflation at 3.1% for FY 2025-26, rising to 4.4% in Q4, and reaching 4.9% in Q1 FY 2026-27, citing base effects and potential weather-related risks.

On the growth front, India’s economy remains robust. Supported by rural demand and public capex, GDP growth is projected at 6.5% for FY 2025-26, with stable momentum expected into FY 2026-27. While domestic indicators are encouraging, global trade tensions and financial market volatility remain key risks.

The RBI highlighted that the impact of previous rate cuts is still unfolding. Holding the repo rate gives time for credit transmission to work through the system, supporting lending and investment without adding inflationary pressure.

In summary, the RBI has opted for a prudent pause, driven by short-term disinflation and a steady growth outlook. The central bank remains data-dependent and will closely monitor both domestic and global developments before its next policy meeting, scheduled for September 29 to October 1, 2025. The MPC minutes will be released on August 20, 2025.