Mumbai (PTI): The Reserve Bank of India (RBI) kept its policy interest rate unchanged on Wednesday, as policymakers weighed the risks posed by US President Donald Trump's trade policies and the uncertainties surrounding the potential for higher tariffs.

The six-member rate-setting panel, headed by RBI Governor Sanjay Malhotra, held the repurchase rate at 5.5 per cent in a unanimous vote and decided to continue with a 'neutral' stance.

While on-track monsoon rains and the approaching festival season are expected to provide buoyancy to the economy, global trade challenges continue to linger, Malhotra said, announcing the decision of the Monetary Policy Committee (MPC).

He, however, did not directly speak about US tariff actions. Trump last month slapped a 25 per cent duty on all Indian goods entering the US from August 7, and on Tuesday threatened to substantially hike the tariff for New Delhi's continued purchase of Russian oil.

"Over the medium-term also, the Indian economy holds bright prospects in the changing world order drawing on its inherent strength, robust fundamentals, and comfortable buffers," he said.

"Opportunities are there for the taking, and we are making all efforts to create enabling conditions through a multi-pronged yet cohesive approach to policy making."

The pause follows a 100 basis point cut in interest rate over three bi-monthly MPC meets in 2025.

The RBI lowered its inflation forecast to 3.1 per cent for the current fiscal year from 3.7 per cent earlier as Malhotra flagged a rise in headline inflation towards the end of the year.

"CPI inflation is likely to edge up above 4 per cent in Q4:2025-26 and beyond, as unfavourable base effects, and demand side factors from policy actions come into play," he said.

The central bank kept GDP growth forecast unchanged at 6.5 per cent for 2025-26.

"Despite a challenging external environment, the Indian economy is navigating a steady growth path with price stability. Monetary policy has appropriately used the policy space created by the benign inflation outlook to support growth without compromising on the primary objective of price stability," he said.

Malhotra said transmission of recent interest rate cuts to the broader economy is underway.

"As the Indian economy strives to attain its rightful place in the global economy, stronger policy frameworks across domains, and not just limited to monetary policy, will be pivotal in its journey," he said.

"We, on our part, will continue to be agile and proactive in providing a facilitative monetary policy based on incoming data and the evolution of the growth-inflation dynamics."

Commenting on the MPC decision, Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, said the decision to keep rates unchanged comes in the wake of global uncertainties, even as inflation remains benign and downside risks to growth persists.

"With inflation likely to trend higher post the near-term favourable trends, the bar for rate cuts ahead is set very high. We can see some room for the last leg of easing only if growth momentum slows significantly."