The RBI’s six-member rate-setting panel met over three days—August 4th, 5th, and 6th—to assess macroeconomic conditions and calibrate its response to the shifting global and domestic landscape. In a unanimous vote, the MPC decided to keep the repo rate steady at 5.5%, with the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates also held at 5.25% and 5.75%, respectively. The panel also reaffirmed its neutral policy stance.
The decision reflects growing concerns over the potential fallout of U.S. trade measures on India’s export-driven sectors and the rupee.
The monsoon has been progressing well across the country, setting a positive tone for the economy. As the festive season approaches, it is expected to further boost consumer sentiment and economic activity. This favorable domestic backdrop—combined with supportive policy measures from both the government and the Reserve Bank—bodes well for India’s near-term economic outlook, said RBI Governor Sanjay Malhotra.
Headline inflation has come in lower than previously projected, largely due to a sharp decline in vegetable prices. However, the RBI noted that core inflation—excluding food and fuel—has remained sticky around the 4% mark, in line with expectations. Inflation is expected to rise again in the final quarter of the fiscal year, partly due to base effects and external price pressures.
“Growth is robust and in line with earlier projections, though still below our aspirations. The uncertainties related to tariffs are still evolving. Monetary policy transmission is continuing, and the impact of the 100 bps rate cut since February 2025 is still unfolding,” Malhotra added.
With uncertainties looming over global trade and capital flows, the central bank signaled a wait-and-watch approach. “On balance, the current macroeconomic conditions, outlook, and uncertainties call for maintaining the repo rate at 5.5%,” the MPC statement said. The committee emphasized that it would maintain a close vigil on incoming data and evolving dynamics before determining the future course of monetary policy.
“The RBI kept the repo rate unchanged as it focused on inflation, which is expected to begin rising steadily from Q4 FY26, while acknowledging a much more benign inflation trajectory in its estimates for the remainder of CY2025. We expect the RBI to keep liquidity adequately in surplus to ensure continued transmission of the rate cut cycle. We believe the RBI will likely remain on a long pause as it focuses on the FY2027 inflation trajectory and steady growth impulses,” said Suvodeep Rakshit, Chief Economist, Kotak Institutional Equities.
