Essential Insights Ahead of the Reserve Bank of India’s Monetary Policy Committee (MPC) Meeting

Mumbai, Aug 4, 2025: The meeting of the Reserve Bank of India Monetary Policy Committee (MPC) has begun on August 4 and will conclude on Wednesday, August 6,, 2025. Below are key highlights for your quick reference:

• The Reserve Bank of India's Monetary Policy Committee (MPC) begins its bi-monthly meeting today, with the policy announcement due on August 6. After reducing the repo rate by a cumulative 100 basis points over the last three meetings — bringing it down from 6.5% in February to 5.5% in June — the committee is now largely expected to maintain status quo. Most economists believe the MPC will keep both the repo rate and its neutral policy stance unchanged..

• Consumer Price Index (CPI) inflation eased sharply to 2.1% in June, well below the RBI’s 4% target. However, rising core inflation, uneven monsoons, and wage pressures pose upside risks. The MPC may lower its FY26 inflation forecast but is likely to retain a cautious outlook, continuing to monitor emerging risks. The GDP growth projection for FY26 is expected to be left unchanged, indicating measured confidence in domestic demand resilience amid global headwinds.

• External factors such as recent US tariff hikes and rupee volatility further add to the uncertainty. With these risks in play, the RBI is expected to adopt a “wait and watch” approach, refraining from additional easing until there is more clarity.

• Havingalready frontloaded rate cuts and ensured adequate liquidity, the MPC is likely to pause andallow time for the effects of previous measures to filter through the economy. Any further rate action — if deemed necessary — is anticipated only in October or beyond, once more data on festive demand, agricultural output, and global conditions is available.

• Despite adopting a neutral policy stance, the Reserve Bank of India (RBI) has indicated that the Government may still cut the repo rate in the future if circumstances warrant. RBI Governor Sanjay Malhotra clarified after the June 2025 policy meeting that a neutral stance means interest rates can move either way depending on the evolving data. He stated, “It will depend on how the data comes in. If thegrowth is weaker, it can mean [the repo rate] will go down. If the growth is good, inflation is going up, the repo rate can go up.”

Attributed to: Bajaj Broking Research