---
title: "After the US-India tariff agreement, the Reserve Bank of India maintains the key interest rate unchanged"
description: "The Reserve Bank of India decided on Friday to keep the benchmark interest rate unchanged. Trump's earlier announcement to reduce tariffs on Indian goods from 50% to 18% significantly improved market "
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/275081272.md"
published_at: "2026-02-06T06:24:06.000Z"
---

# After the US-India tariff agreement, the Reserve Bank of India maintains the key interest rate unchanged

> The Reserve Bank of India decided on Friday to keep the benchmark interest rate unchanged. Trump's earlier announcement to reduce tariffs on Indian goods from 50% to 18% significantly improved market expectations. The Indian government also increased spending in this week's budget, which helps support the rupee exchange rate and provides more room for the Indian central bank to adjust its policies

The Reserve Bank of India decided on Friday to maintain the benchmark interest rate unchanged, opting for a wait-and-see approach after the US-India trade agreement alleviated growth concerns. This decision reflects the central bank's satisfaction with the current policy setting, believing that economic growth is strengthening and inflation remains moderate.

All six members of the Monetary Policy Committee of the Reserve Bank of India unanimously voted to keep the repo rate at 5.25%, in line with the expectations of most economists in a Bloomberg survey. The policy stance remains neutral, indicating that the central bank may continue to hold steady for some time.

RBI Governor Sanjay Malhotra stated in his speech, "The successful conclusion of the trade agreement is a good sign for the economic outlook." **Senior Indian government officials indicated this week that economic growth may exceed their forecast of a maximum of 7.2% for the next fiscal year.**

According to Xinhua, Trump said that he and Modi reached a bilateral trade agreement. The United States will reduce the so-called "reciprocal tariff" rate on Indian goods from 25% to 18%, effective immediately, while India will simultaneously lower tariffs and non-tariff barriers on US goods. This unexpected trade agreement has boosted the growth prospects of the third-largest economy in Asia.

## Trade Agreement and Fiscal Stimulus Boost Confidence

Trump previously announced a significant reduction in tariffs on Indian goods from 50% to 18%, which has significantly improved market expectations. As part of the agreement, Indian Prime Minister Modi agreed to stop purchasing Russian oil and significantly increase the procurement of US oil.

The Indian government also increased spending in this week's budget, which helps support the rupee exchange rate and provides more room for the Reserve Bank of India to adjust its policies. In addition to the agreement with the United States, New Delhi also signed a significant trade agreement with the European Union this year.

Following the central bank's decision announcement, the rupee maintained a slight upward trend. Indian government bonds widened their decline, as the central bank did not announce any new liquidity measures, with the yield on 10-year bonds rising by as much as 6 basis points to 6.70%.

IDFC First Bank economist Gaura Sen Gupta stated, "The tone of the Reserve Bank of India shows satisfaction with the current policy setting, growth is strengthening, and inflation remains moderate." She expects the Monetary Policy Committee to enter a "long-term pause" state.

The Reserve Bank of India has cumulatively cut interest rates by 125 basis points since February last year, including a 25 basis point cut in December last year, due to inflation being far below the 4% target. Malhotra expects the inflation rate for the three months ending March 31 to be 3.2%, and it may exceed the target in the first two quarters of the next fiscal year. Malhotra stated that full-year inflation and growth forecasts will be provided after the government releases a new series of data in April. The Indian government currently expects economic growth for the fiscal year starting April 1 to exceed 7%, while growth for the current fiscal year is expected to be 7.4%

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.