RBI Repo Rate: Amid Status Quo Expectations, Will US Tariffs, Growth Concerns Force MPC To Rethink?
Chances of an offside rate cut remain, amid fresh headwinds from US President Donald Trump's imposition of 25% tariffs, suggest economists.

The Reserve Bank of India's Monetary Policy Committee is expected to maintain a status quo at its upcoming meet in August. Still, signs of weakening growth, alongside announcements of fresh tariffs imposed, suggest that economists are not entirely ruling out a rate cut.
According to economists polled by Bloomberg, the consensus is of a status quo when the MPC meets from Aug. 4-6. However, with CPI inflation undershooting the RBI's estimates, mixed high-frequency indicators and fresh headwinds from US President Donald Trump's imposition of 25% tariffs alongside penalties, chances of an offside rate cut remain.
Lingering trade tensions imply downside risks to growth, which increases the possibility of further easing from RBI with domestic inflation risks contained, said Teresa John, lead economist at Nirmal Bang. "We see room for up to 50 basis points of additional rate cuts from the RBI," John said, adding that she expects a cut of 25 basis points in August.
However, Suvodeep Rakshit, chief economist at Kotak Institutional Equities said that the policy rate would not be an optimal tool to mitigate any negative impact due to tariff. "It is too early for RBI to decide on the growth impact and act in anticipation," he said. The more important task would be to ensure financing is available for SMEs and exporters in case required which would require agility on the regulatory and liquidity front.
Risks To Growth; Falling Inflation
Since the last MPC meeting, inflation readings and the trajectory looks to be lower. CPI inflation moderated to 2.1% in June, from 2.8% in May, according to data from the statistics ministry. This was also the fifth straight month when inflation was below the Reserve Bank of India's 4% target.
Food and beverage prices deflated by 0.2% in June, as against an inflation of 1.5% in May. The core CPI inflation, however, rose to 4.55% from 4.35% last month.
With the recent CPI prints signaling a lower trajectory for the second half of this calendar year, there is a likelihood of a final rate cut of 25 basis points in the August 2025 policy review, said Aditi Nayar, chief economist at ICRA.
The tone of this policy is likely to be balanced, Nayar said, adding that given the recent lower-than-expected CPI prints, the average for FY26 is likely to be lowered from the MPC's June 2025 guidance of 3.7%.
On growth, Nayar said, "when the US had initially imposed tariffs, we had lowered our forecast of India's GDP expansion to 6.2% for FY26, presuming a tepid rise in exports and a delay in private capex. The tariff (and penalty) now proposed by the US is higher than what we had anticipated, and is therefore likely to pose a headwind to India's GDP growth." The extent of the downside will depend on the size of the penalties imposed, she added.
Dhiraj Nim, economist at ANZ, who also forecasts the RBI MPC to cut rates by 25 basis points in August given the GDP growth-CPI inflation mix, said that the growth shock from the imposition of tariffs strengthens chances of a rate cut.