New Delhi [India], August 6 (ANI): The Reserve Bank of India (RBI) is likely to keep the terminal rate at 5.5 per cent for some time in the near-term, asserted Bank of Baroda Economist Jahnavi Prabhakar, citing the central bank’s guidance that future actions will be data dependent and on basis of ongoing development on external front, related to uncertainty due to trade negotiations.
RBI Governor has also cautioned today of a hawkish pause, signalling there is limited room for further easing in interest rates.
At most, the next rate cut could be likely in Q3 2025-26, the Bank of Baroda Economist wrote in a report. However, since the inflation forecast for both Q4 2025-26 and Q1 2026-27 is above the 4 per cent mark, the chances of a rate cut have diminished to a great extent.
At the end of the three-day monetary policy meeting, they decided to keep the repo rate unchanged in line with popular expectations, with the repo rate at 5.5 per cent with a unanimous vote.
This is the first time the RBI has maintained the status quo on rates since it began the easing cycle in February 2025. The stance of the monetary policy was also retained at ‘neutral’.
The RBI had frontloaded rate cuts in its previous policy meet, and the impact of the same is still unfolding.
On the growth front, RBI has retained growth projections for 2025-26 at 6.5 per cent.
The quarterly forecast was also maintained with growth in Q1 at 6.5%; Q2: 6.7%; Q3: 6.6%; and Q4: 6.3%. RBI has suggested Q1 2026-27 growth at 6.6%. Risks are evenly balanced for these projections, as asserted by the RBI.
The central bank noted that the gradual monsoon has been progressing well and is supporting Kharif sowing.
In line with expectations, the RBI has also revised its inflation projections downward for 2025-26 to 3.1% from 3.7% earlier.
RBI noted that the sharp moderation in headline inflation is largely driven by food inflation, which supply-side measures and higher agricultural activity have supported. (ANI)
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