RBI Maintains Status Quo Amid Growth Concerns

In its latest policy review, the Reserve Bank of India (RBI) left the repo rate unchanged at 5.5% and maintained a ‘neutral’ policy stance, diverging from divided market expectations. The central bank cited resilient domestic growth and anticipated inflationary pressures as reasons for its pause.

Despite the current benign inflation, the RBI expects Consumer Price Index (CPI) to edge above 4% later in the year, driven partly by a low base. Still, it revised its FY26 inflation forecast downward to 3.1% from 3.7%.

While the RBI retained its FY26 GDP growth projection at 6.5%, Nuvama Research expressed scepticism, pointing to weak domestic demand, subdued corporate earnings, and sluggish household consumption. These trends, it noted, could constrain tax collections and government spending.

Looking ahead, Market Medley believes the case for further rate cuts remains strong, especially amid global uncertainties and muted pricing power. However, any easing may depend on when the US Federal Reserve resumes its own rate cuts.