Status-quo policy: End of easing cycle?

With inflation seen rising from Q4, another rate cut is uncertain, unless growth changes the script

- TAMAL BANDYOPADHYAY

The Reserve Bank of India's (RBI's) actions in its August monetary policy were on expected lines.

After a cut of one percentage point in the policy repo rate in three tranches — between February and June — the Monetary Policy Committee (MPC), the six-member rate-setting body of the RBI, on Wednesday decided to leave the rate unchanged at 5.5 per cent. The "neutral" monetary policy stance was also kept unchanged. Both these MPC decisions, announced after a three-day meet, were unanimous.

The RBI had changed its stance from "accommodative" to "neutral" after cutting the policy rate by half a percentage point in June.

On Wednesday, it also left its gross domestic product (GDP) growth estimate for 2025-26 (FY26) unchanged at 6.5 per cent, but again pared sharply its projection for the consumer price index (CPI)-based inflation rate for the year — from 3.7 per cent to 3.1 per cent. In June, it had reduced it from 4 per cent to 3.7 per cent.

The governor's statement said the current macroeconomic conditions, outlook and uncertainties called for a continuation of the current policy rate and a wait for further transmission of the "frontloaded" rate cuts to the credit market and the broader economy.