Summary of this article
RBI is expected to hold repo rate at 5.5 per cent in August policy meet.
Experts attribute global trade concerns, weak transmission, and tariff risks as key factors for the pause.
More rate cuts of 50 bps could come later in FY26 after Kharif.
Low CPI inflation and easing food prices give RBI space to wait and watch.
The Reserve Bank of India (RBI) Governor Sanjay Malhotra will announce the Monetary Policy Committee’s (MPC) decision on interest rates on August 6, 2025. The meeting, which started on August 4, comes at a time when retail inflation in India has fallen to its lowest level in more than six years, and while trade talks with the United States still remain in a deadlock.
So far in 2025, the RBI has cut the repo rate by a cumulative 100 basis points and brought it down to 5.5 per cent from 6.5 per cent in February.
RBI Will Not Cut Rates This Time, Say Experts
India’s consumer price index (CPI)-based inflation in June eased to 2.10 per cent, the lowest since January 2019. A good monsoon this season has also kept the food prices lower. Even with these positive signs, most experts think that the RBI will likely assume a wait-and-watch mode to see how earlier rate cuts are impacting the economy.
Vishal Kumar Manoria, Senior Manager, Investment Research & Analytics, Aranca, says, “Despite headline inflation easing to a multi-year low in June, the RBI is expected to keep the repo rate unchanged in the upcoming policy meeting. Having already delivered 100 bps of front-loaded cuts this year, the central bank may pause to assess the transmission impact.” He also warned that recent US tariffs on Indian exports could hit the country’s gross domestic product (GDP) growth and add pressure on the rupee, which could make imports costlier.
Vivek Iyer, Partner and Financial Services Risk Leader at Grant Thornton Bharat, also believes the RBI will hold off on another rate cut for now. He points to four key reasons behind this view. “The external environment continues to be too volatile and uncertain, and there needs to be some more time for the monetary transmission to take effect,” he says. Iyer adds that tariff concerns were already factored into the earlier rate cut and “should not substantially weigh in on the RBI MPC's decision.”
On inflation, Iyer says that while it is currently low, this gives the central bank room to wait. “I believe that is what gives RBI the cushion to wait and watch for some time instead of proposing a rate cut right away,” he explains. He also notes that the RBI has shown its commitment to anchor inflation expectations with its neutral stance. Further, Iyer says that India’s strong foreign exchange reserves mean “we are substantially strong to be impacted by any sort of imported inflation on account of currency depreciation.”
Echoing a similar view, Suresh Darak, Founder, Bondbazaar, notes, “RBI has already front-loaded all the rate cuts to boost economic growth. Now we believe RBI will await the impact of its actions on GDP growth and inflation, before considering any movement in rates.”
Namrata Mittal, Chief Economist, SBI Mutual Fund, too, says the RBI may hold rates this time and opt for wait-and-watch “after lofty moves in June.”
Is This The End Of RBI’s Rate Cut Cycle
No, say experts as they expect further easing later this year. Mittal of SBI Mutual Fund says economic growth in FY26 may fall short of expectations. She says that even after a 100 bps rate cut this year, the real policy rate is still high. With limited support from fiscal measures or exports, she says there is still room for more easing ahead.
Mittal adds that the full effect of monsoon rains on food prices will be clearer by September, and more easing could follow. “We would still be pencilling in another 50 bps rate cut in FY26 post the Kharif season,” she says, adding that weak domestic demand and ongoing trade tensions may further strengthen the case for lowering rates.
Manoria of Aranca says, “Coupled with monsoon-related food price risks and Fed-RBI policy divergence, the RBI is likely to defer further rate cuts until the last quarter of calendar year 2025.”
