MPC members may very well be on the horns of a dilemma on repo price choice at their upcoming assembly

To chop or maintain the coverage repo price — this may very well be a tricky name for RBI’s Financial Coverage Committee (MPC) at its upcoming assembly.

Whereas a piece of the consultants opine that the speed setting panel ought to take a breather after reducing the coverage repo price by cumulative 100 foundation factors (bps), the others suppose it ought to stick with its frontloaded price minimize cycle.

These batting for a pause anticipate the sooner price cuts to work their approach into the economic system.

The pause is probably going within the backdrop of retail inflation remaining under the panel’s 4 per cent goal for the fifth consecutive month in June (at 2.1 per cent), the unsure influence on progress because of Trump’s 25 per cent tariffs on US’ imports from India and its weakening impact on the Rupee, and chance of negotiating decrease tariffs with the US.

Furthermore, RBI Governor Sanjay Malhotra’s latest feedback in all probability trace at a pause within the Financial Coverage Committee’s (MPC) upcoming assembly, scheduled from August 4-6.

In his feedback at a hearth chat hosted by a enterprise publication, Malhotra noticed that the change within the financial coverage stance to “impartial” within the June bi-monthly coverage assessment (from “accommodative”) together with the 50 bps repo price minimize signifies that the bar for additional easing is greater than it could have been if the stance was accommodative.

The MPC has minimize the coverage repo price thrice since February — 25 foundation factors (bps) every in February and April bi-monthly financial coverage assessment and by a jumbo 50 bps in June. The repo price is presently at 5.50 per cent in opposition to 6.50 per cent earlier than the February price minimize.

CARE Rankings’ Chief Economist Rajani Sinha and Senior Economist Sarbartho Mukherjee noticed that the RBI had already frontloaded the speed cuts, anticipating the moderation in inflation. Therefore, additional price cuts are unlikely except progress issues worsen.

The score company’s economists famous that with the RBI having already frontloaded price cuts and guaranteeing ample liquidity, the MPC might want to pause for now and assess how the macroeconomic panorama evolves.

Moreover, transmission of the earlier price cuts continues to be underway and will take some extra time to indicate its impact on the economic system.

Furthermore, a hawkish stance from the US Federal Reserve, ongoing commerce pressure with the US and up to date appreciation of the US greenback index might present additional causes for adopting a wait-and-watch method, as further stress on the rupee might emerge.

“Nonetheless, we anticipate the RBI’s coverage assertion to retain a dovish tone, whereas sustaining a cautious outlook on evolving international developments,” Sinha and Mukherjee mentioned.

Barclays’ Economists, in a report, mentioned they anticipate the RBI’s MPC to ship a dovish pause within the upcoming 6 August coverage, retaining the stance as ‘impartial’.

The MPC will possible revise down their forecast (of three.7 per cent) for FY25-26 CPI inflation, however depart progress projection (6.5 per cent) unchanged, they added. The economists anticipate a closing 25 foundation level minimize in October, taking the terminal price to five.25% .

Frontloaded cuts

SBI’s Chief Financial Adviser Soumya Kanti Ghosh mentioned: “We anticipate RBI to proceed frontloading with a 25 bps minimize within the August coverage. We live in a frontloaded world. Tariff uncertainty frontloaded…higher GDP progress frontloaded for now…CPI numbers in FY27 to proceed to be frontloaded with even a sub 4 per cent quantity with new CPI collection…even festive season is frontloaded in FY26.”

He underscored that empirical proof suggests a powerful decide up in credit score progress at any time when festive season has been early and has been preceded with a price minimize.

Aditi Nayar, Chief Economist, ICRA, mentioned with the latest CPI prints signaling a decrease trajectory for the second half of this calendar 12 months, the typical for FY2026 is prone to be pared from the MPC’s June 2025 steerage of three.7%.

Additional, the tariffs imposed by the US will pose a draw back danger to GDP progress, whereas admittedly injecting volatility into the Indian Rupee.

“In our view, the stability stays barely tilted in direction of a closing price minimize of 25 bps within the August 2025 coverage assessment,” she mentioned.

Revealed on August 3, 2025