New Delhi: The Reserve Bank of India (RBI) is set to announce its third bi-monthly monetary policy for the fiscal year on Wednesday, with RBI Governor Sanjay Malhotra scheduled to unveil the decision at 10 AM. Market watchers and economists largely anticipate a pause on interest rates after a cumulative 100 basis point cut in the last three meetings.
MPC Concludes 3-Day Deliberation Amid Mixed Expectations
The Monetary Policy Committee (MPC), headed by Governor Malhotra and comprising six members, began its three-day deliberations on Monday. While industry segments are split, the prevailing consensus points toward the RBI holding the current repo rate at 5.5%, especially in light of global economic uncertainties.
The committee includes RBI officials Poonam Gupta (Deputy Governor), Rajiv Ranjan (Executive Director) and three external members — Dr. Nagesh Kumar, Saugata Bhattacharya, and Prof. Ram Singh.
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Tariff Concerns and Macroeconomic Data Could Delay Further Cuts
A key factor influencing sentiment is the recent announcement by the US to impose a 25% tariff on Indian imports starting August 7. Experts say this development has introduced fresh economic headwinds that may prompt the RBI to adopt a wait-and-watch approach.
Vivek Iyer, Partner and Financial Services Risk Leader at Grant Thornton Bharat, stated,
“The external environment continues to be volatile and uncertain. There needs to be more time for monetary transmission to take effect. The tariff uncertainty was already priced into earlier rate cuts.”
Industry Divided: Hope for More Cuts vs Expectation of Pause
While a section of industry stakeholders hopes for a 25 bps cut, others agree with a more cautious approach.
Praveen Sharma, CEO of REA India (Housing.com), said:
“With a 100 bps cut already frontloaded this year, the MPC is expected to maintain the status quo. Homebuyers today are guided more by long-term confidence than short-term rate movements. Developers are stepping up with flexible payment plans and buyer incentives.”
Inflation Under Control, But Caution Persists
The Consumer Price Index (CPI)-based retail inflation has stayed below 4% since February 2025, well within the RBI’s medium-term target of 4% ± 2%. However, experts suggest that the central bank may want to see more durable macro data before making further adjustments to the repo rate.
Earlier in the fiscal year, the RBI reduced the repo rate by 25 bps each in February and April, followed by a 50 bps cut in June, bringing the rate down to the current 5.5%.
All Eyes on RBI’s Forward Guidance
As Governor Malhotra prepares to address the nation on Wednesday, markets, banks, and industry leaders will be closely watching not just the rate decision but the RBI’s forward guidance amid a challenging global trade environment and evolving inflationary trends.
