Why the RBI kept repo rate unchanged today and what a neutral stance means

Will they? Won't they? After three rate cuts earlier this year, all eyes were on the RBI’s Monetary Policy Committee (MPC) to see if it would slash rates again.

On Wednesday, the suspense ended: the MPC kept the policy repo rate at 5.5% and retained a neutral stance, signaling that it is watching economic developments closely before making further moves.

So, why did the MPC hold on to the present rates despite the inflation 'horse' largely much stable, well under its tolerance band.

Why the RBI MPC did not cut repo rate?
RBI Governor Sanjay Malhotra explained that the decision was driven by moderating inflation and the fact that the impact of previous monetary and fiscal measures is still playing out.

Also Read: RBI MPC Meeting 2025-26 Key Takeaways

While India’s economy remains on a strong growth trajectory, global uncertainties, tariff-related developments, and unfolding trade risks could slow expansion in the second half of FY26 and beyond.

“The moderation in inflation has given greater leeway for monetary policy to support growth without compromising on price stability,” Malhotra said. However, the MPC decided it is prudent to wait for the cumulative impact of recent policy actions before charting the next course.

Another question is, when there is a leeway, why a 'neutral' stance? The approach indicates that the apex bank is keeping its options open. It is neither easing nor tightening aggressively but is prepared to act based on incoming data, balancing the twin goals of price stability and growth support.

Also Read: RBI MPC lowers inflation aim to 2.6%, thanks to GST rationalisation

Malhotra also pointed to the recent GST rate rationalisation and other policy measures as supportive of domestic demand. “These steps, along with coordinated fiscal and regulatory support, will help India move closer to its goal of a Viksit Bharat by the centenary year of independence,” he added.