India’s central bank kept its policy rate steady at 5.5% Wednesday in the face of rising tariff threats from U.S. President Donald Trump.

The move was in line with expectations from economists polled by Reuters, and comes after the Reserve Bank of India delivered an outsized cut of 50 basis points at its last meeting in June.

RBI Governor Sanjay Malhotra, in his monetary policy statement, said the decision was unanimous. He noted that while global trade challenges lingered, geopolitical uncertainties have “somewhat abated.”

The Nifty 50 index fell 0.18% after the decision, while the Sensex dipped marginally. The rupee strengthened marginally to trade at 87.72 against the dollar.

The RBI’s latest move comes as India navigates rising tensions with the U.S. over its trade ties with Russia. On Monday, Trump criticized India for purchasing Russian oil and weapons, threatening higher tariffs and an unspecified “penalty.”

While domestic growth remains “resilient,” the central bank noted that the outlook for external demand is still “uncertain amidst ongoing tariff announcements and trade negotiations.”

“The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook.”

During the RBI’s last meeting, Malhotra said that there was limited room for monetary policy to support growth due to the 50-basis-point cut in June. As such, the RBI would switch its stance to “neutral” from “accommodative.”

This means that the Monetary Policy Committee, which is the RBI’s key decision-making body, will carefully assess the “incoming data and the evolving outlook to chart out the future course of monetary policy,” Malhotra said.

Analysts at Bank of America said in a July 28 note that the RBI “took away the punchbowl from the markets” by delivering an early, aggressive cut. They expect the central bank to pause for now, and further policy support will only be deployed if there is a major shift in the macroeconomic outlook.

However, the BofA analysts left the door open for a possible rate cut later this year — likely in the fourth quarter of 2025 — once the GDP growth outlook becomes clearer.

The RBI also maintained its GDP growth forecast for its financial year ending March 2026 at 6.5%, but cut its inflation forecast to 3.1%, down from its previous projection of 3.7%.

India’s latest inflation reading still looks supportive for a rate cut, with the headline inflation rate in June hitting a fresh six-year low of 2.1%.

The RBI’s Monetary Policy Committee also said on Wednesday that the near-term inflation outlook has “become more benign than anticipated earlier,” while inflation in 2025 is expected to remain significantly below the central bank’s target of 4%.

Meanwhile, India’s economy expanded at a faster-than-expected annual rate of 7.4% in the quarter ended March, sharply higher than the 6.7% growth forecast by economists in a Reuters poll.

That quarter marked the end of India’s 2024-25 fiscal year, which registered an overall economic growth of 6.5%, in line with the government’s estimate.