RBI Likely to Maintain Current Interest Rates

The Reserve Bank of India (RBI) is expected to keep interest rates unchanged during its October policy review, as inflation in August 2025 is projected to exceed 2 per cent, according to an SBI report. The analysis suggests inflation could reach around 2.3 per cent, making rate adjustments in December challenging.

Inflation Trends and Economic Indicators

Retail inflation (CPI) in India dropped to 1.55 per cent in July 2025, marking the lowest in 98 months, down from 2.10 per cent in June and 3.60 per cent in July 2024. This decline is largely due to easing food inflation, which hit a 78-month low, with food prices decreasing by 75 basis points in July to -1.76 per cent.

Core Inflation and Bond Yields

Core inflation also eased to 3.94 per cent, falling below 4 per cent for the first time in six months. Excluding gold, core inflation dropped further to 2.96 per cent. Meanwhile, the 10-year government bond yield has risen from around 6.30 per cent in July to over 6.45 per cent, with expectations of remaining elevated until more clarity on tariffs is achieved.