The Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) will conclude its three-day meeting with a policy decision today. Markets widely expect the central bank to keep interest rates unchanged at 5.50%. However, the MPC’s comments will be closely watched for signals on what might come next.
Mint takes a look at five key factors that are likely to be on the MPC’s radar.
Will the MPC hold interest rates or make a surprise move?
The monetary policy committee is expected to keep the repo rate on hold, despite emerging risks from global trade tensions.
In a Mint poll of 15 economists, 11 said the RBI would maintain the repo rate at 5.50%, with the policy stance remaining ‘neutral’.
According to a Barclays report, after cutting the repo rate by 100 basis points over the past three policy meetings, the RBI is likely to take a breather at the 6 August meeting. The central bank is expected to deliver a dovish pause while retaining the neutral stance. While this may not signal the end of the easing cycle, it is nearing its end. Barclays expects one final 25 basis point cut in October.
Also read: Will easing inflation and US tariffs prompt another rate cut?
Will tariffs impact the MPC’s decision?
With the US imposing a 25% tariff on Indian goods and uncertainty around penalties for Russian oil imports, economists say the central bank is likely to flag these risks without reacting immediately.
Emkay Global notes that India faces relatively higher trade risk than some Asian peers, but expects the impact to be reflected in growth forecasts rather than in rate decisions.
Will MPC revise its inflation outlook?
In the last policy, the MPC lowered its inflation projection for FY26 to 3.7% from 4% earlier. RBI expects headline inflation to rise from the second quarter and cross the 4% mark by the fourth quarter of this fiscal.
Inflation measured by the consumer price index stood at 2.1% in June, 2.82% in May and 3.16% in April. Economists expect a marginal downward revision in the FY26 inflation forecast.
According to Barclays, the MPC is likely to cut its CPI inflation forecast of 3.7% by 30-40 basis points in the upcoming meeting, while keeping the GDP growth forecast unchanged.
Also read: Why RBI’s bold rate cuts aren’t sparking a lending revival
Will MPC change its forecast on growth?
Economists caution that the recent tariff hikes and ongoing trade tensions could hurt growth, with some estimating a 20–40 bps impact on India’s GDP if exports to the US suffer. Union Bank of India forecasts real GDP growth at 6.3% for FY26, slightly below the MPC’s projection of 6.5%.
However, the US–India trade deal stalemate poses downside risks to growth, and economists say they watch growth indicators closely before revising projections.
What about the surplus liquidity in the banking system?
The liquidity surplus in the banking system stood at ₹3.3 trillion on 31 July, as against surplus of ₹1.8 trillion in the same period last year, according to data from Bloomberg.
The banking liquidity system has been in surplus since 28 March, 2025 after staying in deficit over three months. According to a report by Deutsche Bank, surplus liquidity remains well above 1% of NDTL, prompting the RBI to conduct frequent variable rate reverse repo (VRRR) auctions.
The report adds that this liquidity position should be assessed over a broader horizon of 9-12 months. Otherwise, the cumulative 100 basis point cut in the cash reserve ratio (CRR) between September and November 2025 would be difficult to justify, as it would inject an additional ₹2.5 trillion into the system.
Follow live updates: RBI MPC Meeting 2025 LIVE: RBI Governor Sanjay Malhotra-led MPC likely to keep repo rate steady
