{"id":272109,"date":"2026-02-07T09:13:08","date_gmt":"2026-02-07T09:13:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/272109\/"},"modified":"2026-02-07T09:13:08","modified_gmt":"2026-02-07T09:13:08","slug":"reserve-bank-of-india-holds-key-rate-at-5-25-as-u-s-eu-trade-deals","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/272109\/","title":{"rendered":"Reserve Bank of India Holds Key Rate at 5.25% as U.S., EU Trade Deals"},"content":{"rendered":"

Key Points:<\/p>\n

RBI keeps policy rate unchanged at 5.25% after 2025\u2019s aggressive easing cycle.<\/p>\n

U.S. and EU trade deals ease external risks, boosting growth outlook.<\/p>\n

Focus shifts to rate transmission as India plans record borrowing, pressuring bond yields.<\/p>\n

India\u2019s central bank on Friday kept its benchmark policy rate unchanged at 5.25%, citing easing growth risks after trade deals with the United States and the European Union and a still-positive outlook for inflation and domestic demand.<\/p>\n

The Reserve Bank of India\u2019s decision matched expectations from economists polled by Reuters and follows a cumulative 125-basis-point rate cut in 2025 aimed at supporting growth amid global uncertainty.<\/p>\n

Central Bank Pauses After Aggressive Easing Cycle in 2025<\/p>\n

Reserve Bank of India Governor Sanjay Malhotra said the central bank is pausing its easing cycle as external risks have moderated and domestic conditions remain supportive.<\/p>\n

\u201cExternal headwinds have intensified, though the successful completion of trade deals augurs well for the overall economic outlook,\u201d Malhotra said at a press conference. He added that the near-term inflation and growth outlook remains positive.<\/p>\n

The Reserve Bank of India<\/a> last cut interest rates by twenty-five basis points in December, lowering the benchmark rate to 5.25% in a unanimous decision after flagging weakness in some key economic indicators. Since then, policymakers have signaled a greater emphasis on assessing how previous cuts are feeding through to borrowing costs across the economy.<\/p>\n

India\u2019s economy is forecast to grow 7.4% in the fiscal year ending March 2026 and between 6.8% and 7.2% the following year, according to the government\u2019s economic survey. Those projections would keep India the world\u2019s fastest-growing large economy.<\/p>\n

Inflation pressures also remain muted. Consumer inflation rose to 1.33% in December from 0.71% in November, still well below the central bank\u2019s medium-term target.<\/p>\n

Trade Agreements Reduce External Headwinds, Governor Says<\/p>\n

The policy decision comes days after U.S. President Donald Trump announced that Washington will cut tariffs on Indian exports to 18%, easing concerns about the impact of trade barriers on growth.<\/p>\n

The United States had previously imposed tariffs of as high as 50% on Indian goods, among the steepest levied on any major trading partner. The rollback is expected to support India\u2019s export sector and improve business sentiment.<\/p>\n

Economists say the trade breakthrough reduces the urgency for further monetary easing.<\/p>\n

\u201cThere was an outside chance of a rate cut if the U.S.-India trade deal <\/a>had not gone through,\u201d said Santanu Sengupta, chief India economist at Goldman Sachs, speaking on CNBC\u2019s \u201cInside India.\u201d \u201cThe RBI is now signaling a \u2018lower for longer\u2019 rate environment.\u201d<\/p>\n

The European Union trade agreement, announced earlier, is also expected to provide a boost to investment and market access for Indian companies, reinforcing the central bank\u2019s confidence in the growth outlook.<\/p>\n

Economists See Focus Shift to Rate Transmission<\/p>\n

With policy rates on hold, attention is turning to whether banks pass on earlier cuts to borrowers.<\/p>\n

Sengupta said the RBI will likely focus on improving transmission, even as long-term bond yields are unlikely to fall significantly.<\/p>\n

\u201cBanks and insurance companies are tapering their buying of long-term government securities, while the supply of bonds is rising,\u201d he said.<\/p>\n

India plans to borrow 17.2 trillion rupees, or about $187 billion, in the financial year starting April 1, Finance Minister Nirmala Sitharaman said in her budget speech Sunday. The amount represents an 18% increase from the revised estimate for the current year and exceeds market expectations.<\/p>\n

Higher borrowing could keep upward pressure on bond yields, complicating efforts to lower lending rates despite an accommodative policy stance.<\/p>\n

For now, analysts expect the RBI to maintain a wait-and-see approach.<\/p>\n

\u201cThe central bank has created enough space through last year\u2019s cuts,\u201d Sengupta said. \u201cThe next phase is about ensuring those cuts reach the real economy.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Key Points: RBI keeps policy rate unchanged at 5.25% after 2025\u2019s aggressive easing cycle. U.S. and EU trade…\n","protected":false},"author":2,"featured_media":272110,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":{"0":"post-272109","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-new-zealand","11":"tag-newzealand","12":"tag-nz"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/272109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=272109"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/272109\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/272110"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=272109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=272109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=272109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}