RBI keeps repo rate unchanged at 5.5%

Reserve Bank of India (RBI) has kept the repo rate unchanged, at 5.5%, in its monetary policy meeting today, 1^st October. RBI has also kept its monetary policy stance neutral. Repo rate serves as the benchmark interest rate in the Indian economy. Neutral monetary policy stance means that the RBI will neither try to give a stimulus to the economy nor it will try to slow down the economy.

RBI decides not to give any boost to the Indian economy

The broader expectation today was that RBI will keep interest rate unchanged. But many were also expecting that RBI may go for an interest rate cut to give a boost to the Indian economy. The Indian economy is facing severe headwinds from the higher tariffs imposed by US on Indian goods. Interest rate cut would have lowered the cost of interest sensitive consumption and investment in the economy. This in turn would have given a boost to demand in the Indian economy. Also, the cut in GST rates have put downward pressure on inflation. So RBI also had more room for going for an interest rate cut today.

Central bank did not want to increase the downward pressure on rupee

One reason for RBI not going for an interest rate cut today can be that it does not want to increase the downward pressure on the Indian rupee. An interest rate cut would have put further downward pressure on the Indian rupee. The rupee is currently hovering around record low levels against the US dollar. In 2025, it is the worst performing currency in Asia. In the past one year, the rupee has depreciated by more than 5.6% against the dollar.

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Source: RBI