The RBI kept the policy repo rate unchanged at 5.5%, as expected, following the front-loaded rate cut in June. While the policy stance was maintained at neutral, the Governor signalled a meeting-to-meeting policy approach citing elevated macro uncertainty, keeping the door open for future policy action. The RBI opted for a status-quo, citing that the recent moderation in headline CPI inflation is due to volatile food prices, while core inflation remained stable around 4%. It lowered its FY26 inflation forecast to 3.1% from 3.7%, although it expects inflation to rise above 4% in Q4 FY26 and Q1 FY27 due to base effects. On the growth front, the RBI retained its FY26 real GDP growth projection at 6.5%, supported by rural demand, public capex, and policy support. However, we expect both inflation and real GDP growth to undershoot these estimates. The recently announced US tariff on Indian exports adds to external downside risks. Given muted inflation, and global headwinds, we believe the balance of risks favours an additional rate cut, likely in Q3 FY26, to support economic growth.