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last mo.

RBI Pauses Repo Rate at 5.5%

Analysts see the current rate as a potential terminal point after three cuts earlier in the year

For Too Long, RBI Hasn't Rewarded Government's Fiscal Discipline
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Overview

  • The Monetary Policy Committee maintained the policy repo rate at 5.5% in its August review, describing the hold as a technical pause driven by growth and inflation dynamics.
  • The RBI revised its FY26 consumer price inflation forecast down by 60 basis points to 3.1% based on steady monsoon progress, healthy sowing, strong reservoir levels and ample foodgrain stocks.
  • A State Bank of India report warned that 5.5% may be the terminal rate this cycle and projected at most a 25 basis-point cut later in 2025 if inflation undershoots expectations.
  • A Swarajya op-ed criticized the pause as evidence of misalignment between monetary policy and a decade of disciplined fiscal consolidation.
  • Commentators proposed cutting the repo rate to 4.0–4.5% by early 2026 to align monetary policy with government fiscal gains and to support private investment growth.