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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is set to begin its bimonthly meet up today. The committee will begin its discussions on the key interest rates and monetary policy going forward on August 4, and the final decision of the panel will be revealed on Wednesday, August 6, 2025. 

This MPC meeting comes at a crucial moment for the economy. With the US set to impose 25 per cent tariffs on Indian goods from August 7, economists believe the central bank has a narrow window to support growth before external headwinds intensify.

A Rate Cut Could Bring An 'Early Diwali'

Many analysts, including those at SBI Research, anticipate a 25-basis-point repo rate cut this week, citing soft inflation, tariff uncertainties and the need to frontload support for credit growth.

“We expect the RBI to continue frontloading with a 25 basis point cut at its August MPC meeting. Tariff uncertainty, better GDP growth and CPI numbers in FY27 are all frontloaded. A frontloaded rate cut in August could bring an ‘early Diwali’ by boosting credit growth, especially as the festive season in FY26 is also frontloaded,” the report stated.

Historically, pre-festive season rate cuts have sparked strong borrowing trends. SBI’s report pointed to the August 2017 25 bps cut, which helped fuel an additional Rs 1,956 billion in credit by that Diwali, with personal loans making up nearly 30 per cent of the surge. Such patterns highlight how lower borrowing costs can stimulate demand across retail, auto, and housing sectors during India’s peak consumption period.

RBI Likely To Lower Inflation Estimate

The RBI is also expected to trim its inflation forecast for FY26, with expectations of softer price pressures in the first half of the year. CareEdge Ratings noted headline inflation could dip below 4 per cent by the last quarter of FY26. “With a forward-looking view, the RBI would be focusing on inflation in the quarters ahead. We are maintaining our GDP growth projection at 6.4 per cent in FY26. However, external headwinds warrant close monitoring,” the report noted.

While previous rate cuts are still working their way through the system, markets are watching closely to see if Governor Shaktikanta Das signals further easing. A timely cut could provide a festive boost for borrowers and consumers alike, but any delay risks missing the moment.