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Key Points

CareEdge suggests the RBI is unlikely to cut rates further in its August policy meeting. The central bank has already frontloaded reductions, with inflation expected to moderate. Transmission of past cuts remains incomplete, requiring more time for full economic impact. Global trade uncertainties may influence future decisions but are unlikely to trigger immediate action.

Key Points: RBI Likely to Pause Rate Cuts in August Policy Meeting Says CareEdge

  • RBI frontloaded rate cuts anticipating inflation moderation
  • Inflation expected to breach 4% in Q4 2025-26
  • Global trade uncertainty may impact growth outlook
  • Previous 100 bps cuts still under transmission
2 min read

Expect pause in next policy meeting, RBI already frontloaded rate cuts: CareEdge

CareEdge predicts RBI may hold rates in August policy review, citing frontloaded cuts and incomplete transmission of earlier measures amid moderating inflation.

"A rate cut in the upcoming policy meeting appears unlikely - CareEdge Report"

New Delhi, August 3

The RBI has already frontloaded the rate cuts, anticipating the moderation in inflation, and it is unlikely the central bank would go for further rate cuts unless economic growth concerns aggravate, CareEdge said in a pre-monetary policy review meeting.

While the US reciprocal tariff rate (25 per cent for India) and proposed penalty are concerning, the RBI may opt to wait till "we get further clarity on this front", the rating agency said.

The next bi-monthly RBI monetary policy review meeting is scheduled for August 4-6, 2025.

"With a forward-looking outlook, the RBI would be focusing on inflation in the quarters ahead," the report read.

With CPI-based retail inflation expected to breach 4 per cent in Q4 2025-26 and average 4.5 per cent in 2026-27, the real policy rate would settle in the range of 1-1.5 per cent at the current repo rate, it asserted.

"Therefore, a rate cut in the upcoming policy meeting appears unlikely. Given the incomplete transmission of the previous rate cuts, the RBI is expected to hold off on further easing, allowing time for the full impact of earlier measures to materialise," the report read.

"With the RBI having already frontloaded rate cuts and ensured ample liquidity, the MPC may prefer to pause for now and assess how the macroeconomic landscape evolves. Additionally, transmission of the previous rate cuts is still underway and could take some more time to show its effect on the economy."

The upcoming monetary policy meeting in August takes place against the backdrop of a notable moderation in headline inflation in recent months, largely driven by easing food prices.

Inflation is projected to average below the 4 per cent target over the next two quarters, supported by a favourable base and muted food inflation.

The global trade policy uncertainty will continue to cast a shadow on India's growth outlook; however, the overall impact is likely to be limited given India's limited merchandise trade exposure to the US economy, CareEdge noted.

After a total of 100 basis point repo rate reduction since February 2025, the scope for more rate cuts was limited, RBI Governor Sanjay Malhotra had hinted after the latest monetary policy meeting. The recent frontloaded repo rate cut by the RBI was understandably aimed at boosting economy, which has relatively moderated.

- ANI

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Reader Comments

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Priya S
Good decision to pause. Inflation is still a concern for middle class families like ours. Petrol prices and vegetable costs haven't come down much in local markets despite these 'moderating' numbers.
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Arjun K
The RBI governor is walking a tightrope between growth and inflation. As someone planning to buy a home, I hope they consider one more small rate cut soon to boost housing sector!
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Sarah B
Interesting analysis. As an expat working in India, I see both sides - my Indian colleagues worry about prices while foreign investors want more aggressive rate cuts. RBI's balanced approach makes sense.
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Karthik V
The article misses how rural India is still struggling. RBI should think beyond urban inflation numbers. Farmers need cheaper credit to recover from last year's poor monsoon.
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Meera T
With elections coming next year, I hope RBI maintains its independence in policy decisions. Political pressures shouldn't influence monetary policy! 🇮🇳
D
David E
As an economics student, I find RBI's forward-looking approach impressive. Most emerging markets react to current data, but India is planning quarters ahead. Smart monetary policy!

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