New Delhi: The Reserve Bank of India (RBI) is expected to keep the repo rate unchanged at 5.50 per cent in its upcoming Monetary Policy Committee (MPC) meeting, a new report said on Monday. The central bank had last cut the repo rate by 50 basis points in June, while the August review saw the rate being held steady, according to a report by Bajaj Broking.
The report said the RBI is likely to maintain the current rate as inflation remains low and manageable, but risks to growth are becoming more visible. India’s consumer price inflation rose slightly to 2.07 per cent in August from 1.61 per cent in July, ending a ten-month streak of moderation. Despite the uptick, inflation continues to stay well below the RBI’s 4 per cent target and within the permissible band.
Economists pointed out that the rise in food prices was the main driver, but rationalisation in Goods and Services Tax (GST) rates could help bring retail prices down in the coming months. On the growth front, the Indian economy expanded at a robust 7.8 per cent year-on-year (YoY) in the June quarter, surpassing expectations, as per the report.
The growth was largely supported by government expenditure, though private investment continues to remain weak. However, the report warned that global headwinds, including US trade tariffs and geopolitical tensions, could put pressure on India’s growth outlook in the coming quarters. The report also highlighted the RBI’s recent liquidity measures, including the Cash Reserve Ratio (CRR) cut in September, aimed at boosting credit flow and supporting economic activity.
However, borrowing costs are still relatively high, especially for central and state governments. Going forward, the central bank is expected to strike a neutral tone in its guidance. The RBI will likely balance its priority of supporting economic growth with the need to keep prices stable, the report said.
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