The decision of the Reserve Bank of India (RBI) to keep the repo rates unchanged in the August policy cycle is seen as a technical break that is powered by inflation projections and growth dynamics, according to a report from SBI. The SBI report noted that inflation is expected to remain below 3 percent until the third quarter of FY26, but could rise sharply to 4.9 percent in the first quarter of FY27.
In such a scenario, and with expectations of a robust GDP growth, the report added that the current repo speed of 5.5 percent can prove to be the terminal percentage. It is of the opinion: “We believe that if RBI inflation projections for FY26 can remain correct, then a 5.5 percent repo rate may be the terminal rate.”
The SBI added that the scope for a reduction in 2025 is limited, because policy actions are already loaded at the front and the GDP growth is expected to remain strong in the first half of the year. This has pushed the beam even higher for a speed reduction. However, if inflation can be accommodated, there can be room for a rate reduction, a maximum of 25 basic points, although the timing of such a movement will be crucial. It is stated: “The difficult part for such a further rate is that has been done with all and a foraded robust BDP growth in the first half, the bar for a rate in 2025 is even higher.”
In its policy statement, the RBI said that incoming data and trends of domestic growth inflation would follow closely to guide future decisions. Factoring in steady monsoon progress, healthy kharifsi, adequate reservoir levels and comfortable food shares, the RBI repeated its FY26 CPI inflation projection down by 60 basic points to 3.1 per cent.
The decision of the MPC, according to the report, emphasized that the caution in an environment where inflation remains within the goal remains but future risks, which means that the August is more technical adjustment than a shift in policy direction.
Published on August 8, 2025
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