RBI's Monetary Policy Committee convenes, experts predict no interest rate adjustment in August 6's policy announcement
RBI Maintains Repo Rate at 5.5% in August 2025 Policy Meeting
The Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.5% in its August 2025 policy meeting, following a unanimous decision by the Monetary Policy Committee (MPC). This decision comes after a 50-basis-point cut in June, a move prompted by easing inflation and soft food inflation, placing inflation within the RBI's comfort zone.
Before the meeting, economists held mixed expectations. Some anticipated a rate pause at 5.5%, while a few expected a possible 25-basis-point cut, considering monetary space and global policy trends. However, the actual decision was to maintain the rate unchanged, emphasizing continued monitoring of macroeconomic conditions and allowing time for the previous cuts to fully transmit to the economy.
The RBI's decision will be influenced by domestic inflation trends, global economic headwinds, and evolving monetary policy landscapes. The MPC meets every two months to decide on key interest rates and set the tone for the country's monetary policy.
Ahead of the policy decision, several top economists shared their expectations and forecasts. Ajay Bagga, a banking and market expert, believes the RBI has space for a rate cut of 25 basis points in the upcoming meeting. On the other hand, Dipanwita Mazumdar, Economist at Bank of Baroda, expects the RBI to adopt a "wait and watch" approach in the upcoming meeting. Debopam Chaudhuri, Chief Economist at Piramal Group, predicts a rate cut of 25 basis points in October.
The repo rate cut in June was driven by softening inflation, with both near-term and medium-term projections falling within the RBI's target range. Food inflation remained under control, as per the Governor's statement.
The US Federal Reserve held rates constant, but the hawkish tone in Chair Powell's press conference led to September rate cut probabilities falling to 41%. The Bank of Japan also held rates steady this morning.
However, economists have pointed out that the US tariffs pose a potential downside risk to India's economic growth. Assuming a 10% fall in the value of Indian exports to the US, the GDP could see an impact of around 0.2%.
The final announcement regarding the repo rate will be made on August 6, following the three-day Monetary Policy Committee (MPC) meeting in Mumbai from August 4 to August 6. The policy announcement by RBI Governor Sanjay Malhotra is scheduled for 10 AM on August 6.
- Economist Ajay Bagga anticipates a potential 25-basis-point rate cut in the upcoming MPC meeting, given the RBI's current monetary space and global policy trends.
- As the RBI and the Monetary Policy Committee (MPC) consider various domestic and global factors, such as inflation trends and economic headwinds, the business community watches closely for insight into the country's monetary policy.
- The ongoing trade tensions and potential downside risks from US tariffs on Indian exports could influence the RBI's decision on future interest rates, affecting the overall business environment, finance, and food sectors.
