RBI MPC decision August 6: What Sanjay Malhotra said about growth, inflation, and US tariffs

The Reserve Bank of India (RBI), in its 56th Monetary Policy Committee (MPC) meeting held from 4th to 6th August 2025, has decided to keep the policy repo rate unchanged at 5.5%. The decision was announced by RBI Governor Sanjay Malhotra and supported unanimously by all six members of the MPC.

Key Highlights of the MPC Decision (as per RBI)

• Repo rate remains at 5.5%
• Standing Deposit Facility (SDF) stays at 5.25%
• Marginal Standing Facility (MSF) and Bank Rate remain at 5.75%
• Stance: Neutral

Decision aligns with RBI’s goal to maintain CPI inflation at 4% (within a +/- 2% band) while supporting economic growth

Growth Outlook

India’s domestic growth continues to be resilient, supported by:

• Strong rural demand and private consumption
• Rising government capital spending
• South-west monsoon helping agriculture and kharif sowing
• Construction and services sectors performing well
• Industrial growth, however, remains uneven, especially in electricity and mining

GDP growth for 2025–26 is projected at 6.5%, with:

• Q1: 6.5%
• Q2: 6.7%
• Q3: 6.6%
• Q4: 6.3%
• Q1 of 2026–27 growth is estimated at 6.6%

Inflation Outlook (as per RBI)

• CPI inflation fell to a 77-month low of 2.1% in June 2025
• Food inflation entered negative territory for the first time since 2019 at -0.2%
• Core inflation rose to 4.4% in June, partly due to rising gold prices

Inflation Forecast for 2025–26

• Full-year CPI inflation: 3.1%
• Q2: 2.1%
• Q3: 3.1%
• Q4: 4.4%
• Q1 of 2026–27: 4.9%

Inflation could rise above 4% from Q4 onwards due to base effects and demand-side pressures

Rationale Behind the Decision

• Headline inflation is lower than previously expected, mainly due to falling food prices
• Core inflation remains steady around 4%, showing some upward movement
• The impact of 100 basis points of rate cuts since February 2025 is still working its way through the economy
• Growth is in line with projections, but global uncertainties and new trade tariffs continue to pose risks
• Given this mixed environment, the MPC has chosen to pause and watch how the economy evolves

Next Meeting of the MPC

• The RBI will closely monitor economic data and inflation trends to decide on future actions
• The next MPC meeting is scheduled for 29th September to 1st October 2025