RBI leaves room for rate cuts in future; tariff risks loom: Report

The Reserve Bank of India (RBI) has kept its policy interest rate unchanged at 5.5 per cent for the second consecutive meeting, while retaining flexibility for future reductions. This comes after the monetary policy committee (MPC) significantly lowered its inflation projections, according to a Crisil Intelligence analysis cited by PTI.

The central bank, in its October 1 review, expressed concerns over tariff-related uncertainties. The Crisil report noted that the MPC also flagged potential downside risks to GDP growth in the latter half of FY26, largely due to the impact of US tariffs.



The analysis said the recent adjustments in GST rates would help offset some of these pressures. "Certain labour-intensive sectors are most vulnerable to the impact of US tariffs and need policy support. With inflation becoming a less worry this fiscal, the initiation of US Federal Reserve's rate cuts will provide space for the RBI to cut rates," Crisil Intelligence said.

Since February 2025, the RBI has cut its policy rate by 100 basis points. This included reductions of 25 bps each in February and April, followed by a 50 bps cut in June, bringing the repo rate down to 5.5 per cent.

The government has mandated the RBI to maintain Consumer Price Index (CPI)-based retail inflation at 4 per cent, with a tolerance band of 2 per cent on either side. Retail inflation has stayed below 4 per cent since February, touching a six-year low of 2.07 per cent in August, aided by easing food prices and a favorable base effect.