The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, commenced its three-day meeting on August 4, 2025. The outcome of this critical meeting will be announced on Wednesday, August 6. As the central bank navigates a volatile global landscape and a shifting domestic growth-inflation equation, all eyes are on whether the MPC will opt for another rate cut or prefer to pause.
The meeting comes on the heels of the US imposing a 25 percent tariff on Indian goods—raising fresh concerns over export competitiveness and global trade friction. With the repo rate already cut by 100 basis points over the last three policy reviews—from 6.5 percent in February to 5.5 percent in June—the RBI has maintained a ‘neutral’ stance. However, a mix of easing inflation and concerns over future growth has triggered market debate over the likelihood of another rate reduction.
Rate Cut or Pause: What Are the Experts Saying?
According to Elaara Capital, the risks to India’s growth have clearly increased, while inflation appears well under control. The firm expects July inflation to hover around 2 percent—near the lower end of the RBI’s 2–6 percent tolerance band. Should US tariffs begin to impact exports more sharply, there could be a case for a larger rate cut of up to 50 basis points, though they don’t foresee any major inflation shock unless there’s a sudden global supply disruption.
Meanwhile, a report by the State Bank of India (SBI) has forecast a 25 basis point rate cut in this meeting, noting that such a move, if frontloaded, could help revive credit demand ahead of the festive season. The report pointed to historical evidence where pre-Diwali repo rate cuts spurred strong lending growth and consumer activity.
Waiting for more data
On the other hand, Bajaj Broking believes that having already frontloaded rate cuts and ensured ample liquidity, the MPC may prefer to pause in the August meeting. The brokerage suggests that the central bank might wait for more data on festive demand, agricultural output, and global conditions before contemplating further action—potentially in October or later. While the RBI’s neutral stance keeps the door open for both rate hikes and cuts, any move will likely hinge on incoming macroeconomic data.
Nuvama echoed a similar view, highlighting that the MPC’s shift to a neutral stance during the last policy review suggests limited scope for additional immediate cuts. The firm does acknowledge, however, that inflation has consistently undershot expectations. This might prompt the RBI to consider returning to an ‘accommodative’ stance, especially as fiscal policy remains neutral-to-tight and global growth forecasts remain weak.
Inflation and Growth Outlook
As per Bajaj Broking, CPI inflation cooled to 2.1 percent in June, well below the RBI’s 4 percent target. Despite this, factors such as rising core inflation, patchy monsoons, and wage cost pressures could reintroduce upward risk in the coming months. The MPC may revise its FY26 inflation forecast downward, but is expected to retain a cautious tone.
Regarding growth, the RBI is unlikely to change its FY26 GDP forecast, signalling its belief in the underlying resilience of domestic demand despite global headwinds.
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