RBI August 2025 Policy Decision likely to hold repo rate steady at 5.5% amid US tariffs and inflation retreat
The RBI August 2025 Policy Decision is widely expected to maintain the benchmark repo rate at 5.5%, as the Monetary Policy Committee (MPC) concludes its three-day meeting on Wednesday. A majority of economists anticipate a status quo, even as India assesses the economic impact of a 25% US tariff hike and ongoing trade talks with Washington. The Reserve Bank of India’s stance reflects a careful balancing act between moderating inflation and emerging growth concerns.
According to an ET poll, 12 out of 16 economists believe the MPC will keep the repo rate unchanged. However, four respondents, including one who correctly predicted the June rate cut, expect a further 25-basis point reduction. They cite the recent drop in retail inflation, which has touched a six-year low, as a key factor.
SBI, which anticipated the 50-basis point June cut accurately, supports another reduction. It projects FY26 average CPI inflation at 2.7–2.9%. The bank also expects July inflation data to hit a record low. SBI’s chief economic adviser, Soumya Kanti Ghosh, warns that delaying a cut could cause greater economic damage, especially to output and investment sentiment.
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Economists acknowledge the risks stemming from the US tariff move, which could shave off 20–40 basis points from India’s growth. Despite this, most experts expect the RBI to retain its FY26 GDP growth forecast at 6.5%. IDFC First Bank’s Gaura Sen Gupta notes that trade negotiations are still ongoing, and the central bank may highlight global uncertainty and export risks in its commentary.
Nomura has raised the probability of an August cut to 35%, up from 10%, although it still projects cuts for October and December. Meanwhile, ANZ, which earlier favoured a pause, now sees a cut this month.
While inflation is easing, economists expect the RBI to revise its FY26 CPI inflation forecast from 3.7% down by 30–40 basis points. Barclays expects the final 25-basis point cut of the current easing cycle in October. For now, it anticipates a dovish pause, with the stance remaining neutral.
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Since February, the RBI has already reduced the repo rate by 100 basis points, including a frontloaded 50-bps cut in June. The revised liquidity framework, expected soon, may not be released alongside this week’s MPC decision.to inject liquidity to offset any tightening due to its FX (forex) intervention, as sufficient banking system liquidity is a necessary condition for faster policy transmission,” it said on July 31.
Nomura has retained its growth forecast at 6.2% but flagged a downside risk of about 0.2 percentage points if the tariffs remain in place.
