RBI MPC meet: Rate cut unlikely in August; growth, inflation rate in focus

RBI MPC: The odds of another cut in the August meeting are rising after the US imposed a 25 per cent tariff on Indian exports

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is widely expected to keep policy rates unchanged at its upcoming August 6 review, but sentiment has shifted after US President Donald Trump announced a 25 per cent tariff on Indian exports.

RBI MPC: Rate cut still unlikely

In June, the MPC cut the repo rate by 50 basis points to 5.5 per cent and shifted its stance from accommodative to neutral, dampening expectations of another cut in the August review.

 

A Business Standard poll found that six out of ten economists expect no change in August, while four see scope for a 25-bp reduction.

 

A separate Reuters survey conducted between July 18–24 showed most of the economists (44 of 57) expected the RBI to hold rates in the August meeting.

Growth outlook stable, but global risks persist

India's retail inflation hit a six-year low of 2.1 per cent in June on easing food prices and a favourable monsoon. Even the manufacturing sector expanded at its fastest pace in 16 months, with the HSBC–S&P Global PMI climbing to 59.1 in July. 

 

With the manufacturing sector reporting strong growth and the July inflation expected to fall to a record low, the MPC may frontload a rate cut.

 

ANZ Research told Reuters that a 25-bp cut was likely even without the tariff announcement.

Focus shifts to inflation, growth estimates

All respondents of the poll conducted by Business Standard expected the committee to lower the inflation forecast for the financial year 2025-26 (FY26). The Consumer Price Index (CPI) was revised downward to 3.7 per cent in June from 4 per cent. 

 

“With the recent CPI prints signalling a lower trajectory for the second half of this calendar year, the average for FY26 is likely to be pared,” Aditi Nayar, chief economist, ICRA, earlier told Business Standard.

 

Most economists expect the growth estimate to remain unchanged at 6.5 per cent for FY26 in the August meeting. 

Mild easing expected later in 2025

Many economists see the RBI holding off on another cut until October or December, when more data will be available on:

• Q1 GDP performance
• Monsoon outcomes
• US Federal Reserve policy signals

By October, policymakers will have more clarity to decide on further rate action.