RBI Monetary Policy August 2025

RBI Keeps Repo Rate Unchanged at 5.50%

The Reserve Bank of India (RBI), in its bi-monthly monetary policy meeting held on 6^th August 2025, decided to maintain the repo rate at 5.50%, as widely expected by the market. The decision was taken unanimously by the six-member Monetary Policy Committee (MPC), which also retained its neutral stance, providing flexibility to respond to evolving domestic and global macroeconomic conditions.

Focus on Inflation and Growth Balance

The RBI’s policy decision comes against the backdrop of moderating inflation and stable growth outlook. The central bank noted a significant decline in headline inflation, with the Consumer Price Index (CPI) easing to 2.1% in June 2025, well below its medium-term target of 4%. In light of this, the central bank has revised its inflation forecast for FY2025–26 downward to 3.1%, from the earlier estimate of 3.7%.

On the growth front, the RBI maintained its GDP growth projection at 6.5% for FY26, signaling continued confidence in India’s economic resilience. The quarterly estimates remain unchanged, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3% and Q1FY27 at 6.6%.

External Uncertainty a Key Concern

While domestic indicators remain stable, the RBI flagged external risks—particularly global trade tensions and potential U.S. tariffs on Indian exports—as key variables that could impact the economic outlook. The central bank emphasized that it would continue to monitor geopolitical developments and global commodity price trends.

Policy Outlook and Market Implications

By maintaining a neutral stance, the RBI has signaled that it remains open to adjusting its policy direction based on future inflation and growth data. The current pause gives the central bank room to maneuver in response to potential external shocks without prematurely tightening or loosening monetary conditions.

The market is likely to interpret today’s decision as positive for bond and equity markets, especially amid a dovish inflation outlook. The possibility of a future rate cut, while not imminent, remains open if disinflation sustains and growth headwinds intensify.

Conclusion

The RBI’s August 2025 policy reflects a careful balancing act—acknowledging the comfort provided by falling inflation while remaining vigilant about global uncertainties. With stable macro fundamentals and a data-dependent approach, the central bank is positioning itself to safeguard economic stability in a dynamic global environment.