The Reserve Bank of India (RBI) on Wednesday kept its key repo rate steady at 5.5%, as expected, opting to wait and watch amid global trade tensions and after earlier rate cuts. RBI Governor Sanjay Malhotra announced the decision following a three-day meeting of the Monetary Policy Committee (MPC), which unanimously voted to maintain the status quo and continue with a "neutral" policy stance.

“All six members of the MPC voted to keep the policy repo rate under the Liquidity Adjustment Facility unchanged at 5.5%,” Malhotra said.

This comes after the central bank lowered the repo rate by 50 basis points in June, bringing the total rate cut for the year to 100 basis points. The earlier cut was prompted by a decline in inflation, with both short- and medium-term levels now within the RBI’s comfort range. Food inflation has also remained subdued, giving the central bank more leeway.

Despite ongoing global trade headwinds — including rising tensions over India’s oil trade with Russia and looming US tariffs — Malhotra said the outlook for the Indian economy remains “bright.”

However, he cautioned that while headline inflation is currently low, it’s largely due to soft food prices and may inch up later in the year.

The RBI retained its GDP growth forecast for FY26 at 6.5%. Still, some economists warn that the new 25% US tariffs on Indian exports, set to kick in Friday, could trim up to 40 basis points off growth and dampen business investment.

Meanwhile, softer-than-expected US job numbers have increased pressure on the US Federal Reserve to lower interest rates, with markets pricing in an 88% chance of a cut in September.

Though economists believe there’s room for limited further easing by the RBI, any additional cuts will likely depend on how inflation and global risks evolve in the coming months.