RBI Holds Repo Rate at 5.5%, Raises GDP Growth Forecast for FY26
The Reserve Bank of India's Monetary Policy Committee unanimously decided to keep the policy repo rate unchanged at 5.5%. The central bank cited moderating headline inflation and strong economic growth in the first quarter as key factors. Consequently, the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates also remain unchanged. Alongside this decision, the RBI raised its GDP growth forecast for India for the 2025-26 fiscal year to 6.8%, signaling confidence in the country's economic trajectory.
Unpacked:
The repo rate is the interest rate at which the RBI lends to commercial banks. Keeping it unchanged at 5.5% signals the RBI's intention to maintain current borrowing costs, supporting economic growth while monitoring inflation risks.
India’s inflation rate in August 2025 was 2.07%, which is well below its recent average of 5.77% since 2012 and much lower than the 2013 high of 12.17%. This reflects a period of unusually low inflation for India.
The RBI raised its GDP growth forecast due to robust economic growth in the first quarter and sustained improvements in key sectors, indicating resilience and positive momentum for the Indian economy.
The RBI targets an inflation range of 2% to 6%. The current rate of 2.07% is just above the lower end, suggesting price stability and providing the RBI space to keep rates steady or consider future cuts if needed.