RBI Monetary Policy Statement August 2025

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The 56th meeting of the Monetary Policy Committee (MPC) was held from August 4–6, 2025, under the chairmanship of Shri Sanjay Malhotra, Governor of the Reserve Bank of India (RBI). Other members present were Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta, and Dr. Rajiv Ranjan.

Policy Decision

The MPC decided to keep the key policy rates unchanged:

  • Repo Rate: 5.50%
  • Standing Deposit Facility (SDF): 5.25%
  • Marginal Standing Facility (MSF) & Bank Rate: 5.75%

This decision supports RBI’s twin objectives — maintaining Consumer Price Index (CPI) inflation close to the 4% target (within a ±2% tolerance band) while continuing to support economic growth.

Growth Outlook

Global Scenario

  • Global growth remains subdued despite a slight upward revision by the IMF.
  • Disinflation is losing momentum in many economies, with some advanced nations experiencing a rebound in inflation.
  • Global trade faces challenges from tariff hikes and trade negotiations.

Domestic Economy

  • Economic activity in India remains resilient, supported by private consumption (especially rural demand) and fixed investment (boosted by strong government capital expenditure).
  • Agriculture: Benefiting from a normal monsoon and healthy kharif crop sowing.
  • Services Sector: Strong growth led by construction and trade.
  • Industrial Sector: Mixed performance; electricity and mining sectors remain sluggish.

GDP Growth Projection for 2025–26: 6.5%

  • Q1: 6.5%
  • Q2: 6.7%
  • Q3: 6.6%
  • Q4: 6.3%
  • Q1 2026–27: 6.6%

Inflation Outlook

Current Situation (June 2025)

  • CPI inflation: 2.1% — the lowest in 77 months and falling for the eighth straight month.
  • Food inflation: -0.2% (negative) for the first time since February 2019, helped by strong farm output and effective supply management.
  • Core inflation: Increased slightly to 4.4%, partly due to higher gold prices.

Projection for 2025–26: 3.1%

  • Q2: 2.1%
  • Q3: 3.1%
  • Q4: 4.4%
  • Q1 2026–27: 4.9%

Key Risks to Inflation

  • Weather disruptions affecting agriculture.
  • Global economic uncertainties and trade conflicts.
  • Stronger domestic demand from policy stimulus in later quarters.

Why Repo Rate Was Left Unchanged

  1. Inflation Control: Current inflation is well below target, but expected to rise above 4% in late FY2025–26 due to seasonal and demand-side pressures.
  2. Support for Growth: GDP growth forecast remains steady at 6.5% for FY2025–26.
  3. Effect of Previous Rate Cuts: RBI has cut rates by 100 basis points since February 2025; The full impact of these cuts is still feeding through the economy.
  4. Global Uncertainty: Risks from trade and tariff disputes could hurt exports and capital flows.
  5. Neutral Policy Stance: MPC will keep monitoring inflation and growth data before making further moves.

Key Facts for Exam Preparation

  • Repo Rate: 5.50% (unchanged)
  • GDP Growth 2025–26: 6.5%
  • Inflation 2025–26: 3.1% (likely to rise above 4% in Q4)
  • Reason for no rate change: Waiting for earlier rate cuts to take effect; inflation likely to pick up later in the year.
  • Major Risks: Weather shocks, trade disputes, global inflation trends.
  • Next MPC Meeting: September 29 – October 1, 2025

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