RBI retains rate as US trade deal lifts economic outlook
Keeps rates steady at 5.25% after seven-month easing spree
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. Announcing the decisions of the MPC, RBI Governor Sanjay Malhotra said external headwinds have intensified, but the successful completion of the trade deal with the United States bodes well for the economy.
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.
"With the signing of a landmark trade deal with the European Union and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period. The current policy rate is appropriate,” the governor said, adding that inflation was benign and future rate moves will depend on growth outlook and inflation.
“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.
