RBI MONETARY POLICY DECISION PENDING: MPC MEETS AMID US TARIFF UNCERTAINTY

The Reserve Bank of India’s Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, has begun its three-day meeting from August 4–6, 2025. The key repo rate decision will be announced at 10 AM IST on August 6, following deliberation on inflation trends, growth outlook, and rising global risks.

meeting context and expectations

Analysts expect the RBI to maintain the repo rate at 5.50%, following cumulative cuts of 100 basis points earlier in the year. The policy stance has shifted to “neutral,” and the MPC is weighing whether further easing is warranted amid falling inflation and slowing economic momentum. Most economists, including a Reuters poll of 57, anticipate no change, while a smaller minority forecasts a possible 25 bps cut. 1

global trade headwinds and tariff threat

The backdrop includes escalating trade tensions, notably the United States’ recent imposition of a 25% tariff on Indian exports. This has led to pressure on the rupee, which tightened near record lows before intervention by RBI. Exporters warn of downside risk to GDP growth amid shrinking global demand. 2

indian rupee under pressure

The rupee weakened to 87.80/USD, avoiding a record low largely due to RBI’s timely currency intervention via state-run banks. Ongoing volatility and foreign portfolio outflows have made liquidity guidance—and the tone of post-policy commentary—as important as the rate decision itself. 3

five key factors to watch

• Inflation trajectory: CPI has eased to around 2.1%, well below the 4% target, giving room for easing. 4
• Growth outlook: With GDP modestly resilient, RBI must balance support needs and external risks. 5
• Festive demand: Past data shows a rate cut before Diwali boosts credit growth, influencing expectations. 6
• Liquidity management: RBI’s surplus infrastructure and commentary on liquidity flow critical for market stability. 7
• Policy stance: Watch for forward guidance on future tightening or easing and clarity on global risk outlook. 8

In summary, Wednesday’s RBI policy announcement will be closely watched—not just for whether rates remain at 5.5%, but for signals on RBI’s bias amid trade-induced vulnerabilities. The decision is expected at 10 AM, followed by a press briefing providing deeper economic guidance.