The Reserve Bank of India (RBI) began its three-day monetary policy meeting on Monday, led by Governor Sanjay Malhotra, to decide on the next bi-monthly policy rate. The Monetary Policy Committee (MPC) is expected to announce its decision today on Wednesday, 6 August, with many experts predicting a pause in the ongoing rate easing cycle.
The RBI started cutting rates in February and has already reduced the repo rate by 100 basis points in three steps. However, with new economic uncertainties, particularly the 25% tariff the US is set to impose on Indian imports from 7 August, some experts believe the central bank may now hold off on further rate cuts.
Pause Likely Amid Global Uncertainty
Experts say that while the current data shows low inflation, the RBI might choose to maintain the status quo to monitor how the US tariffs impact the Indian economy.
Chief Economist at Bank of Baroda Madan Sabnavis said the policy decision will not be based on the recent drop in inflation or the US tariff announcement. He noted that the RBI likely factored in tariff-related risks earlier, and a minor revision in inflation projection, from 3.7% to around 3.5–3.6%, could be expected.
He added, “The cost of oil for the economy will also play a role. We expect no change in stance or policy rate this time. The RBI’s tone is likely to be cautious but optimistic due to resilient growth indicators.”
Inflation Is Low, But Transmission Still Incomplete
Retail inflation, measured by the Consumer Price Index (CPI), has stayed below 4% since February, standing at 2.1% in June. The government has tasked the RBI with keeping inflation at 4%, allowing a 2% margin on either side.
CareEdge Ratings pointed out that not all benefits of the previous rate cuts have reached the market yet. So, holding rates steady may give time for these changes to take effect fully.
Chief Economist at ICRA Aditi Nayar said that with inflation easing, the MPC might revise its full-year forecast from 3.7% to a lower average. However, she warned that the US tariffs could weaken GDP growth and create instability in the Indian rupee (INR).
Industry Still Hopes for a Modest Rate Cut
While many expect the RBI to pause, some industry leaders are still hoping for a 25 basis point cut, especially given the pressure on small businesses and exporters.
Mandar Pitale from SBM Bank India said that tariffs could create uncertainty and affect market sentiment. He believes the current situation makes a good case for the RBI to stay accommodative.
CEO & Co-Founder of Biz2X Rohit Arora said that MSMEs are already struggling with reduced liquidity and could suffer further from the US tariffs. A rate cut, he said, could help them stay afloat and keep creating jobs during the upcoming festive season.
Jash Panchamia from Jaypee Infratech also called for a cut, pointing out that inflation is at a six-year low. He said the real estate sector would benefit from another cut, boosting demand and buyer confidence.
Co-CEO of Andromeda Sales and Distribution Raoul Kapoor feels that while an aggressive cut is unlikely, a moderate 25 bps reduction is still possible given low inflation and easing global tensions.
Who’s on the MPC?
The six-member Monetary Policy Committee includes:
The RBI started cutting rates in February and has already reduced the repo rate by 100 basis points in three steps. However, with new economic uncertainties, particularly the 25% tariff the US is set to impose on Indian imports from 7 August, some experts believe the central bank may now hold off on further rate cuts.
Pause Likely Amid Global Uncertainty
Experts say that while the current data shows low inflation, the RBI might choose to maintain the status quo to monitor how the US tariffs impact the Indian economy.Chief Economist at Bank of Baroda Madan Sabnavis said the policy decision will not be based on the recent drop in inflation or the US tariff announcement. He noted that the RBI likely factored in tariff-related risks earlier, and a minor revision in inflation projection, from 3.7% to around 3.5–3.6%, could be expected.
He added, “The cost of oil for the economy will also play a role. We expect no change in stance or policy rate this time. The RBI’s tone is likely to be cautious but optimistic due to resilient growth indicators.”
Inflation Is Low, But Transmission Still Incomplete
Retail inflation, measured by the Consumer Price Index (CPI), has stayed below 4% since February, standing at 2.1% in June. The government has tasked the RBI with keeping inflation at 4%, allowing a 2% margin on either side.CareEdge Ratings pointed out that not all benefits of the previous rate cuts have reached the market yet. So, holding rates steady may give time for these changes to take effect fully.
Chief Economist at ICRA Aditi Nayar said that with inflation easing, the MPC might revise its full-year forecast from 3.7% to a lower average. However, she warned that the US tariffs could weaken GDP growth and create instability in the Indian rupee (INR).
Industry Still Hopes for a Modest Rate Cut
While many expect the RBI to pause, some industry leaders are still hoping for a 25 basis point cut, especially given the pressure on small businesses and exporters.Mandar Pitale from SBM Bank India said that tariffs could create uncertainty and affect market sentiment. He believes the current situation makes a good case for the RBI to stay accommodative.
CEO & Co-Founder of Biz2X Rohit Arora said that MSMEs are already struggling with reduced liquidity and could suffer further from the US tariffs. A rate cut, he said, could help them stay afloat and keep creating jobs during the upcoming festive season.
Jash Panchamia from Jaypee Infratech also called for a cut, pointing out that inflation is at a six-year low. He said the real estate sector would benefit from another cut, boosting demand and buyer confidence.
Co-CEO of Andromeda Sales and Distribution Raoul Kapoor feels that while an aggressive cut is unlikely, a moderate 25 bps reduction is still possible given low inflation and easing global tensions.
Who’s on the MPC?
The six-member Monetary Policy Committee includes:- Sanjay Malhotra, RBI Governor
- Poonam Gupta, Deputy Governor
- Rajiv Ranjan, Executive Director
- Nagesh Kumar, Director, ISID
- Saugata Bhattacharya, Economist
- Ram Singh, Director, Delhi School of Economics
