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Informist, Wednesday, Aug. 6, 2025

 

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--RBI Governor Malhotra begins monetary policy announcement 
--RBI Malhotra: MPC left repo rate unchanged at 5.50% 
--RBI Malhotra: MPC voted 6-0 to leave repo rate unchanged at 5.50% 
--RBI Malhotra: MSF, Bank rates remain unchanged at 5.75%; SDF rate at 5.25% 
--RBI Malhotra: Policy stance remains 'neutral' 
--RBI Malhotra: All MPC members decided to continue with neutral stance 
--RBI Malhotra: MPC voted unanimously to keep 'neutral' policy stance 
--RBI Malhotra: Monetary policy to be based on incoming data 
--RBI Malhotra: Monetary policy to be based on growth-inflation dynamics 
--RBI: Next MPC meeting to be held on Sept 29-Oct 1 
--RBI: Minutes of Aug MPC meeting to be released on Aug 20 

 

MUMBAI – The Reserve Bank of India's Monetary Policy Committee Wednesday left the policy repo rate unchanged at 5.50% in a unanimous decision, the central bank Governor Sanjay Malhotra said. All six members of the committee also retained the 'neutral' policy stance.

 

The rate-setting panel's decision was on expected lines. Fourteen of the 17 economists polled by Informist had expected the MPC to hold interest rates at this meeting. The committee has lowered the repo rate by 100 basis points so far in 2025. It started lowering interest rates in February with a 25-bps cut, followed by another 25-bps cut in April and a larger-than-expected 50-bps reduction in June.

 

The RBI lowered its inflation projection for the current financial year by 60 bps to 3.1%. The central bank retained its growth projection for FY26 at 6.5%.

 

The MPC's decision to hold interest rates comes amidst a turbulent external environment and lingering risks to growth. US President Donald Trump has threatened substantially raising tariffs on India from the 25% already announced. 

 

Malhotra said growth remains robust and on expected lines though "below our aspirations". He added that uncertainties from tariffs are still evolving and the impact of the 100 bps rate cut since February is still unfolding on the economy .

 

"On balance, therefore, the current macroeconomic conditions, outlook and uncertainties call for continuation of the policy repo rate of 5.5% and wait for further transmission of the front-loaded rate cut to the credit markets and the broader economy," the governor said. 

 

Malhotra said the outlook for FY26 inflation is more benign than expected in June. Inflation, however, is seen rising above 4% in 2026 as "unfavourable base effects, and demand side factors from policy actions come into play". The RBI projects CPI inflation at 4.4% in Jan-Mar and 4.9% in the June quarter next year.

 

CPI inflation fell to a 77-month low of 2.1% in June and is expected to hit a record low of 1.3% in July, as per an Informist poll. 

 

Malhotra said an internal working group – which reviewed the Liquidity Management Framework operative since February 2020 — has recommended continuation of overnight weighted average call rate as the operating target of monetary policy. It has also recommended to continue with the variable rate auction mechanism for repo and reverse repo operations of various tenors with the objective to maintain the operating target rate at the policy rate.

 

With the repo rate held at 5.50%, the Standing Deposit Facility remains at 5.25% and the Marginal Standing Facility and bank rate stay at 5.75%. Minutes of the August MPC meeting will be published on Aug. 20. The next meeting of the MPC is scheduled for Sept 29-Oct 1.  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

 

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