RBI Policy
MPC seen leaving rates unchanged in Aug, one more cut likely Oct-Dec
This story was originally published at 09:38 IST on 28 July 2025
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By Shubham Rana
NEW DELHI – The Reserve Bank of India's Monetary Policy Committee is expected to leave interest rates unchanged next week, having lowered the policy repo rate by 100 basis points already this calendar year, including a larger-than-expected 50-bps rate cut in June, according to an Informist poll. However, the rate-setting panel could lower the repo rate by another 25 bps in the December quarter as inflation continues to undershoot projections and growth remains below aspirations.
Fourteen of the 17 economists polled said they expect the MPC to leave the repo rate unchanged at 5.50% at the end of the three-day meeting on Aug. 6. Three poll participants said a rate cut remains a possibility next week after retail inflation fell to an over-six-year low of 2.10% in June and averaged 2.7% in Apr-Jun, 20 bps lower than the central bank's projections.
Some economists had ruled out further rate cuts after the six-member MPC unexpectedly changed the policy stance to neutral from accommodative, which was adopted only in April, along with the 50-bps rate cut in June. But lower-than-expected inflation prints in the June quarter and the benign food price outlook could allow the MPC to reduce interest rates further, economists said.
RBI Governor Sanjay Malhotra has said lower-than-expected inflation can offer space for further monetary policy easing. On Friday, Malhotra said the neutral stance allows the MPC to move in either direction, or keep interest rates on hold. The current stance, however, does mean the bar for further policy easing is higher, the governor said. Malhotra said rate cuts will depend on the outlook for growth and inflation, rather than the current numbers.
The central bank has projected CPI inflation at 3.7% in 2025-26 (Apr-Mar) and GDP growth at 6.5%. Malhotra last week said inflation projections could be revised lower at the August MPC meeting, "given that inflation is coming in lower than our projections". Malhotra has said GDP growth at 6.5%--the FY25 print and the FY26 projection--remains below the aspirational level of 8%.
Economists see inflation and growth lower than RBI's projections for the current year. "Given the benign inflation outlook (we expect CPI to stay below 3% through end-December 2025) and downside risks to FY26 GDP growth (which we currently forecast at 6.6%), we think the risk of a 25bps rate cut at the August or October policy meeting has increased," economists at Standard Chartered said in a report.
Upasana Chachra and Bani Gambhir of Morgan Stanley also believe the risk of a rate cut in August has risen. "However, we are inclined towards a pause in Aug as we believe that RBI may wait for more data to assess the trend in growth (given that it has front-loaded policy easing), as well as note that even as near-term inflation is lower than expected, 1 year-ahead inflation is likely to be unchanged from earlier expectations," Chachra and Gambhir said in a note.
Morgan Stanley expects a rate cut in October while most other economists polled by Informist also predicted further easing in the third quarter of FY26. Only three of the 17 poll participants said they do not see any more rate cuts in 2025.
Whatever the MPC decides next week, it is highly unlikely the decision will be unanimous. In June, external member Saugata Bhattacharya voted for a 25-bps cut. His fellow member Ram Singh has also said the neutral stance does not mean the end of the rate-cutting cycle.
The following are expectations of respondents from the Aug. 4-6 meeting of the MPC:
| ORGANISATION | AUGUST MEET EXPECTATION | FUTURE RATE CUT EXPECTATION |
| Barclays | Status quo | 25 bps cut in Oct-Dec |
| Capital Economics | Status quo | No more rate cuts |
| CareEdge Ratings | Status quo | No more rate cuts |
| Crisil | Status quo | -- |
| HSBC | Status quo | 25 bps cut in December |
| ICICI Securities Primary Dealership | Status quo | Risk of 25 bps cut in Oct-Dec |
| ICRA | Rate cut possible | -- |
| IDFC FIRST Bank | Status quo | 25 bps cut in October |
| India Ratings and Research | Status quo | Two cuts in Oct-Dec |
| Kotak Mahindra Bank | Rate cut possible | 25-50 bps more cuts in 2025 |
| Morgan Stanley | Status quo | 25 bps cut in October |
| Nomura | Status quo | 25 bps cut each in October and December |
| QuantEco Research | Rate cut possible | 25 bps cut in August or October |
| Standard Chartered | Status quo | Risk of 25 bps cut in August or October |
| STCI Primary Dealer | Status quo | No more rate cuts in 2025 |
| Union Bank of India | Status quo | 25-50 bps rate cut possible in Oct-Mar |
| YES Bank | Status quo | One more cut possible in Oct-Dec |
End
Edited by Ashish Shirke
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