Experts are of the view that the neutral position signifies a conscious balance between stimulating economic growth and controlling inflation levels.
The Reserve Bank of India’s Monetary Policy Committee (MPC) has maintained the status quo on its repo rate by keeping it unchanged at 5.5 per cent for the second consecutive time, citing concerns over tariff uncertainties. RBI Governor Sanjay Malhotra also said the MPC unanimously decided to keep the short-term lending rate or repo rate unchanged at 5.5 per cent with a neutral stance. Stating that GST rate rationalisation will have a sobering impact on consumption and growth, the RBI has revised its growth projections for FY26 upwards.
The gross domestic product (GDP) growth forecast for FY26 has been revised upward to 6.8 per cent, with quarterly estimates of 7 per cent in Q2 as against 6.7 per cent announced earlier, 6.4 per cent in Q3 as compared to 6.6 per cent earlier, and 6.2 per cent in Q4 as against 6.3 per cent projected earlier. The central bank has also revised CPI inflation downwards to 2.6 per cent for FY26 from the earlier projection of 3.1 per cent.
What Does It Mean?
According to experts, the move reflects the central bank’s optimism about the resilient economic outlook.
“Raising the GDP FY26 forecast to 6.8 per cent from 6.5 per cent earlier and lowering the FY26 CPI inflation forecast to 2.6 per cent from 3.1 per cent earlier reflect the Central bank’s optimism about the resilient economic outlook. The Governor’s comments indicate the possibility of one more rate cut; but it will depend on the incoming data and evolving outlook,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Experts are of the view that the neutral position signifies a conscious balance between stimulating economic growth and controlling inflation levels.
“When inflation is expected to be 2.6 per cent and GDP growth expected to be 6.8 per cent, this plan guarantees stability to borrowers across the board. For home lending applicants, a stable interest rate scenario gives clarity to borrowing costs, which forms the basis of efficient financial planning. Additionally, this shows that the RBI’s cautious approach will help enable continuous credit flows without fanning the inflationary trend,” said Pramod Kathuria, Founder & CEO, Easiloan.
