Monetary Policy Review Anticipated

The Reserve Bank of India (RBI) is likely to keep the repo rate unchanged at 5.5 percent in its upcoming monetary policy review on August 6. This decision comes after three consecutive rate cuts totaling 100 basis points, as the central bank aims to balance growth concerns with subdued inflation rates.

Expert Insights on RBI's Stance

Experts, including Bank of Baroda chief economist Madan Sabnavis, suggest that the RBI may adopt a cautious tone, drawing comfort from resilient growth figures. With CPI-based retail inflation at a comfortable 2.1 percent in June, further rate cuts seem unlikely unless growth challenges intensify.

Impact of Global and Domestic Factors

Aditi Nayar, Icra chief economist, highlights the potential downward revision of inflation estimates due to recent CPI prints. The imposition of US tariffs poses a downside risk to GDP growth, possibly leading to a final rate cut of 25 basis points.

RBI's Inflation Target and MPC Composition

The RBI's mandate to maintain inflation at 4 percent, with a ±2 percent margin, guides its policy decisions. The Monetary Policy Committee, led by Governor Sanjay Malhotra, includes both RBI officials and external members, ensuring a comprehensive review of economic indicators.