The Reserve Bank of India is widely expected to cut the repo rate by 25 basis points at its Monetary Policy Committee meeting scheduled for August 4–6, 2025, potentially reducing it from 5.50% to 5.25%. The move follows three rate cuts earlier in 2025 totaling 100 bps, including a significant 50 bps reduction in June.
🔍 Why a Cut Is on the Table
✅ Cooling Inflation
Headline CPI inflation has eased sharply, with June’s print at around 2.1%, well below the RBI’s 4% medium-term target, giving policy space for easing.
🏦 SBI & ICICI Forecasts
Reports from SBI Research and ICICI Bank anticipate an August repo rate cut, citing soft inflation, early festive demand potential, and subdued urban consumption.
⚖️ RBI’s Policy Stance
Previously, the RBI frontloaded cuts in February, April, and June. While its stance shifted from “accommodative” to “neutral”, the central bank remains data-dependent. A pause may be preferred unless growth weakens.
🕐 What Could Delay a Cut?
🌍 Global Uncertainty
Ongoing U.S. tariff threats and geopolitics could influence RBI to wait for more clarity before altering policy.
⚡ Incomplete Transmission
Recent cuts have not fully transmitted into consumer credit costs; RBI may delay further action to assess impact.
📊 Core Inflation Reserves
A modest rise in core inflation (excluding food/fuel) suggests residual price pressures which could prompt caution.
🧾 At‑a‑Glance Summary
| Item | Detail |
|---|---|
| Current Repo Rate | 5.50% (after 100 bps cuts in 2025) |
| Expected Cut | 25 bps to 5.25% |
| Meeting Dates | August 4–6, 2025 |
| Inflation Status | ~2.1% CPI in June; trending below 4% target |
| Key Risks | Tariff uncertainty, transmission lag, core inflation |
| Drivers for Cut | Cooling inflation, growth support, festive credit |
🌐 Impacts & Outlook
A repo cut to 5.25% would support credit growth ahead of Diwali, boost consumption, lower home loan rates, and ease borrowing costs for MSMEs and corporates. It could also prompt bond yields to dip, benefiting long-term debt. However, too much easing could reduce real policy rates to uncomfortable levels and heighten speculative risks.
🧭 What’s Next
Economists remain split: polls show around 75% expect a hold, mostly citing data dependency and global risks. Others remain open to a final 25 bps cut during the final quarter of 2025 if base effects support disinflation.
