This marks the first status quo under Governor Sanjay Malhotra, who took office earlier this year. The RBI lowered its FY26 inflation forecast to 3.1% from 3.7% earlier, while retaining the growth projection at 6.5%.
Speaking to the media, Malhotra said there wasn’t enough data to revise gross domestic production (GDP) forecasts and noted, “India is less dependent on the outside so far as inflation is concerned.”
Deputy governor Poonam Gupta added that half of India’s inflation basket consists of food, limiting global impact.
In response to US President Donald Trump’s ‘dead economy’ comment, the RBI governor said, “We are contributing about 18% to global GDP growth, which is more than the US, where the contribution is expected to be much lower at 11%.”
“So, we are doing very well and will continue to further improve,” he said.‘Volatility Persists’
In April, the RBI had cut its FY26 growth forecast from 6.7% to 6.5% in the backdrop of the first set of tariff announcements from the Oval Office
“It is very difficult to predict what the impact will be going forward,” Malhotra said, on whether the projections factor in the impact of punitive tariffs.
“We are hopeful that we will have an amicable solution,” the RBI governor told the media, ahead of the US announcing an additional 25% tariff on Indian goods, following a similar increase on Tuesday.
SBI chairman CS Setty said the RBI’s decision to hold rates was expected, citing trade uncertainties and lagged policy effects. “Inflation is likely to remain under check at 3.1% for FY26, and growth impulse is expected to be intact,” he said.
LOOMING TARIFF THREAT
The MPC’s decision came ahead of US President Donald Trump imposing fresh tariffs over New Delhi continuing to purchase oil from Moscow which the Oval Office believes has helped fuel Russia’s war efforts.
Economists estimate existing 25% tariffs could reduce growth by 20-30 basis points. One basis point is a hundredth of a percentage point.
Malhotra said MPC chose to go for status quo amid geopolitical uncertainties and “wait for further transmission of the frontloaded rate cuts to the credit markets and the broader economy”.
The RBI had earlier cut rates by 100 bps and announced a phased 100 bps CRR cut starting September.
Goldman Sachs described the policy announcement “somewhat hawkish”. The 10-year government bond yield climbed 9 basis points (bps) to 6.42%, reaching levels last seen in early May.
Yields have risen despite a 50 bps rate cut in June, and Wednesday’s decision, along with the governor’s comments, tempered expectations of a rate cut in October. “There will be some volatility; we are living in very uncertain times,” he said. “The US dollar has seen appreciation and then depreciation, movements on both sides of about 10%.”
The Indian rupee edged higher to 87.73 against the dollar, up from its previous close of 87.80.
The benchmark BSE Sensex retreated 0.21% to end at 80,543.
‘GLOBAL GROWTH ENGINE’
Refuting comments from President Trump that India is a “dead economy,” the governor said that India is contributing significantly to global growth.
Economists, including SBI’s Soumya Kanti Ghosh, who had advocated easing rates by a quarter percentage point, said the central bank raised the threshold for any further rate cuts. However, Madhavi Arora, chief economist at Emkay Global, argued that focusing narrowly on one-year inflation projections is increasingly misplaced amid shifting global dynamics.
