Sanjay Malhotra, Governor of the Reserve Bank of India | Photocredit: Dhiraj Singh
After cutbacks for loading the front, the cumulation of 100 basic points during the period of February June 2025 cumulated, the six -member tariff panel of the RBI struck the brakes on its current speed cutting cycle.
De Hawkish -pauze op het repo -tarief kwam te midden van de mogelijkheid dat de inflatie boven de 4 procent doelstelling van de MPC uit het vierde kwartaal werd afgevoerd, doorlopend overdracht van eerdere tariefverlagingen naar de bredere economie, en de vooruitzichten op externe vraag die onzeker blijven vanwege de steile 25 procent tarief op de Indiase import in de VS (en zijn verdieping van de roepie).
Rate break
In a relocation that was generally expected, all six members of the Monetary Policy Committee (MPC) of the RBI voted to maintain the policy repair rate (the interest rate with which banks borrow funds from RBI to overcome short-term liquidity mismatches on 5.50 percent. They also decided to continue with the neutral attitude.
It may be relevant to state here that RBI Gouverneur Sanjay Malhotra recently noted that the change in the monetary policy position to neutral (from the accommodation) in the bi-monthly policy assessment in June, together with the reduction of the 50 basic points would be higher than retaining the bar.
Inflation insight
On Wednesday he said: “The MPC noted that, although the head inflation (at a lowest point of 77 months in June) is much lower than previously projected, it is mainly due to volatile food prices, especially of vegetables.
“Core inflation, on the other hand, has remained stable around 4 percent, as expected. Inflation is expected to rise from the last quarter of this financial year.”
The governor noted that domestic growth persists and according to earlier projections under the ambitions of RBI (of 6.5% plus).
Furthermore, the uncertainties of rates are still evolving and the monetary policy transmission of the 100 BPS Repo rate in the credit and deposit rates is continued.
“On balance, therefore, the current macroeconomic conditions, prospects and uncertainties ask for continuation of the policy repepo percentage of 5.5 percent and wait for further transfer of the advanced rate reduction to the credit markets and the broader economy,” Malhotra said.
Rating agency Icra said in a note with unchanged rates in this meeting, it is expected that an extensive break is underway.
“By the time that the data starts to display a delay in quarterly GDP growth prints (Q3 print released at the end of February 2026), inflation will probably be normalized to more than 4 percent.
“This will probably limit further monetary relaxation, continue. Bond yields seem to agree with the expectations of a continuous break, in which the return of 10 years has risen after the policy statement,” the memorandum said
Nuvama Wealth said that the return of the 10-year-old benchmark-government protection (6.33% GS2035) paved 9 BPS to close at 6.42 percent versus the previous closure of 6.33 percent, probably driven by the absence of DOVISH signals or no clarity about future tariff reductions in the in the in the policy.
Kahik Das, Managing Director, Chief Economist-India, Malaysia and South Asia, Deutsche Bank, noted that it is better to hold the policy percentage at the present moment, given the prevailing unprecedented uncertainty with regard to tariff negotiations and also considering that the MPC supplied a pre-loaded 50 BPS rate.
“We characterize today’s action as a” cautious attitude “of a patient and future -oriented MPC … We now pencil cut into another 25 bps in the 1star October policy among our baseline scenario, which reduces the repo rate to 5.25%, while the short-term rates are tailored to the repo rate, “he said.
In the meantime, the RBI has reduced its CPI inflation projection to FY26 to 3.1 percent of the previously projected 3.7 percent, even while managing the real GDP growth by 6.5 percent.
The Central Bank also estimated CPI inflation for Q1FY27 at 4.9 percent, which is an abovery than the purpose of the MPC of 4 percent.
Published on August 6, 2025
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