RBI holds repo rate at 5.25%, maintains neutral policy stance

The Reserve Bank of India (RBI) on Wednesday kept the policy repo rate unchanged at 5.25 per cent, with the Monetary Policy Committee (MPC) retaining its neutral policy stance amid persistent global trade uncertainties and geopolitical tensions,according to agency reports.With the decision, the Standing Deposit Facility (SDF) rate remains at 5 per cent, while the Marginal Standing Facility (MSF) rate and the bank rate continue at 5.5 per cent.
Announcing the MPC's decision, RBI Governor Sanjay Malhotra said the committee opted to maintain the status quo as global uncertainties continue to weigh on the economic outlook.He noted that fresh tariff measures announced by the United States have prolonged global trade uncertainties, while the ongoing crisis in West Asia has led to volatility in crude oil prices and financial markets.
The policy decision was largely in line with market expectations, with economists anticipating that the six-member MPC would leave both the benchmark interest rate and the neutral monetary policy stance unchanged.The RBI said inflation has moderated significantly from earlier highs but has witnessed some upward movement in recent months. It added that inflation remains susceptible to crude oil prices, exchange rate movements and geopolitical developments, although it continues to stay within the central bank's prescribed tolerance band.
On the domestic front, the central bank said economic activity remains resilient, supported by healthy growth momentum, favourable monsoon conditions and sustained foreign capital inflows.Governor Malhotra said the Indian economy continues to demonstrate resilience but cautioned that signs of stress are emerging in certain segments. He added that considerable risks remain around both inflation and growth prospects, warranting a cautious and calibrated monetary policy approach.The RBI's decision signals its preference to closely monitor evolving domestic and global developments before considering any further changes to interest rates, as policymakers seek to balance inflation control with sustaining economic growth.

(Business Correspondent)