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Informist, Monday, Aug. 4, 2025

 

MUMBAI - Following are the expectations of economists from the meeting of the Reserve Bank of India's Monetary Policy Committee, which began Monday. The committee's decision will be announced on Wednesday.

 

MICHAEL WAN, MUFG BANK

We forecast RBI to cut rates two more times, bringing the repo rate to 5.00% from 5.50% currently. This compares with our previous forecast of one more cut. We see these two cuts likely coming in the October and December meetings, and for the RBI to keep rates on hold thereafter till second half of 2026.

 

Our latest tracking of domestic economic activity shows that growth in India has softened over the past few months, led by weaker activity in urban consumption. The good news from a domestic perspective is that inflation is likely to remain low and contained, while external stability indicators such as the current account deficit is likely to remain below 1% of GDP absent a sharp spike in global oil prices. This combined with a decent southwest monsoon, coupled with supportive monetary and fiscal policy are likely to remain key local drivers moving forward for India and rupee.

 

GOLDMAN SACHS

We expect the RBI to remain on hold at the August meeting, after a front-loaded 50 basis points repo rate cut in the June meeting, which brought the total quantum of easing in the current cycle to 100 bps. The June meeting also saw the RBI shift its monetary policy stance from "accommodative" to "neutral," signalling the likely end of the easing cycle.

 

While overall financial conditions in India have eased somewhat since the June meeting, primarily through the foreign exchange channel, interest rates across various tenors have tightened, largely attributable to the change in the policy stance.

 

While we expect the RBI to retain the "neutral" stance at the August meeting, we expect them to cut inflation and growth forecasts, and provide a dovish guidance to aid monetary policy transmission. Going forward, with downside risks to growth from the tariff related uncertainty, along with a generally benign inflation trajectory, we now forecast another 25 bps repo rate cut by the RBI in Oct-Dec this year, which would take the repo rate to 5.25%.

 

Two primary risks could alter this view: a rapid and mutually beneficial resolution of the US-India trade negotiations, or a quicker-than-expected rise in core inflation towards 4.0%. Should either of these scenarios materialise, we would expect the RBI to remain on hold and instead rely on the liquidity infusion from the phased 1?sh reserve ratio reduction — announced in the June meeting — beginning September, to aid monetary policy transmission.

 

SOUMYA KANTI GHOSH, GROUP CHIEF ECONOMIC ADVISOR, STATE BANK OF INDIA

We expect RBI to continue frontloading with a 25 bps cut in August policy. With inflation having decisively eased and remaining within the RBI's tolerance band for several months, maintaining a restrictive policy stance risks exacerbating output losses that are neither easily reversible.

 

Monetary policy operates with lags, and postponing a rate cut until inflation falls further or growth weakens more visibly could result in deeper and more persistent economic damage. At this point, the marginal benefit of waiting is low, while the cost of inaction in terms of forgone output, investment sentiment is likely to be significant.

 

CAREEDGE RATINGS

The RBI had already frontloaded the rate cuts, anticipating the moderation in inflation. Hence, we do not expect further rate cuts unless growth concerns aggravate.

 

While the US reciprocal tariff rate and proposed penalty are concerning, the RBI may opt to wait till we get further clarity on this front. With a forward-looking outlook, the RBI would be focusing on inflation in the quarters ahead.

 

With CPI inflation expected to breach 4% in Jan-Mar and average around 4.5% in FY27, the real policy rate would settle in the range of 1–1.5% at the current repo rate. Therefore, a rate cut in the upcoming policy meeting appears unlikely. Given the incomplete transmission of the previous rate cuts, the RBI is expected to hold off on further easing, allowing time for the full impact of earlier measures to materialise.

 

BARCLAYS

Having cut the repo rate by 100 bps in quick succession over the last three policy meetings, we expect the RBI MPC to take a breather in the upcoming Wednesday meeting, and deliver a dovish pause, while retaining the stance as 'neutral'.

 

That's not to say that the rate easing cycle in India is over, but it's just about there. We expect the final 25 bps cut of this easing cycle in October. We expect the MPC will likely revise down their CPI inflation forecast of 3.7% by 30-40 bps in the upcoming meeting, while retaining their GDP growth forecast. We also await the revised liquidity framework announcement, which the RBI may choose to not announce alongside the MPC statement. 

 

HSBC

The upcoming RBI meeting on Wednesday will be held amidst global and domestic uncertainties. We believe the central bank will keep rates unchanged for now.

 

Why are growth trends confusing? We find that the formal sector growth is weakening after a strong run, while the informal sector is strengthening after a weak patch. Details in tax collection, sectoral credit and relative wages speak of that. The uncertainty has been further exacerbated by data in June coming in rather weak. Only time will tell if this was a one-off, or a new trend. Finally, whether the 25% tariff on India's exports to the US sticks, is yet to be seen.

 

Average inflation across FY26 and FY27 is at 4%. Core inflation excluding gold is also in the 4?llpark, and hasn't fallen much over the last year. As such, underlying seems to be at the RBI's 4% target. As the RBI awaits the impact of the large easing it has already done, we believe it will stay put on repo rate changes on Wednesday.

 

KAUSHIK DAS, CHIEF ECONOMIST - INDIA, MALAYSIA, AND SOUTH ASIA, DEUTSCHE BANK

The RBI has already delivered front-loaded rate cuts of 100 bps within a relatively short period of time and also provided ample liquidity in the banking system to support a durable recovery in growth.

 

If growth momentum disappoints in the coming months, then the central bank can squeeze in one more 25 bps rate cut in October policy, but beyond that we see little justification for monetary policy to bear additional burden, given that the RBI has to also keep in mind medium-term price and financial stability considerations, while informing its monetary policy decision.

 

Assuming the Fed cuts a total of 175-200 bps in this cycle, we think the RBI's 100 bps front-loaded rate cut is appropriate and that the repo rate should not be lowered more than the current rate of 5.50%, taking into consideration the need to maintain real interest rates of 100-150 bps on a forward-looking basis, as well as sufficient interest rate differential with the US to attract growth-critical capital inflows.

 

We think any additional burden to growth arising out of tariff tension should be dealt with by the government, either through further negotiations or/and through fiscal policy response.

 

ANZ BANK INDIA

Even without that tariff announcement, a case could be made for a 25 bps rate cut. The 25% tariff rate is an added growth shock, which will likely compel the MPC to act pre-emptively to support growth while inflation is not an issue.

 

We expect a 25 bps rate cut in August, bringing it forward from our previous forecast of October. Inflation is set to remain below 4% until the end of FY26, creating a safe space for the RBI to support growth sooner rather than later.

 

Both growth and inflation are set to undershoot the RBI's forecasts, with added risks from tariffs. With the liquidity surplus expected to taper into the year-end, monetary policy transmission may get hindered, requiring a further lowering of the policy rate. The RBI may however stick to its neutral stance, emphasising the benefit of flexibility it accords in a volatile economic and financial market environment.

 

End

 

Compiled by Shubham Rana

Filed by Vandana Hingorani

 

 

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