Majority of the Mint Road observers are of the view that the Reserve Bank-led monetary policy committee that begins its three-day customary meeting from Monday to decide on the third monetary policy review of the fiscal, to pause again both on key rates, as well as on policy stance fronts.
The policy review comes after three years of a significant shift in the monetary policy strategy—from aggressive inflation control following the post-pandemic surge in prices to a more balanced approach aimed at supporting growth while maintaining macroeconomic stability. After raising the repo rate by a cumulative 250 bps points between May 2022 and February 2023, the RBI kept rates unchanged at 6.50% throughout fiscals 2023 and 2024 to tame inflation and with prices coming down it began easing from February 2025, and slashed repo by 125 bps in five consecutive reviews.
Soumyakanti Ghosh of SBI Research was for status-quo citing a slew of factors like the improving dollar inflows/rising forex reserves and the resultant fall in the open forward position of the central bank in the forex market, better-than-expected monsoons leading better sowing, a strengthening rupee and Q1 growth exceeding 7% among others.
“The RBI is mostly to pause (rates) even as global risks rise but domestically there are many positives like Q1 growth likely to surpass 7%; $35 billion capital inflows till July-end, enabling foreign exchange recoup of $12.5 billion as of July 24 and vacating outstanding forward position by $13 billion in the short-end till June. But the current backdrop has made soft language costlier: oil volatility, rupee pressure, external-flow caution and higher inflation projections make an explicitly dovish message less likely,” Ghosh said in a note.
More importantly from macro front, monsoons have recovered with July surplus reducing the overall nationwide shortfall to 13% now, he said, adding reservoir levels are equal to normal (though less than last year level), kharif sowing is only 4.7% lower than the 2025 levels indicating better harvest.
Icra Ratings chief economist Aditi Nayar also expects a hold on the rates and policy stance.
“So far, there is no evidence of generalization of inflationary pressures, suggesting a likely status quo on August 5. Greater clarity is also needed on monsoons turnout,” Nayar told TNIE. But warned that “there could be a back-ended rate hike in the second half of the fiscal” if key numbers indicate more risks.
However, Madhavi Arora, the chief economist at brokerage Emkay Global, expects a 25 bps rate cut, arguing the consensus status quo view appears to emanate from the June policy guidance rather than the present macro realities.
“We believe there are enough reasons for the MPC to deviate from the previous guidance and deliver a 25 bps repo cut this time, and be more open-ended in its further guidance for further easing ahead,” Arora told TNIE.
Foreign brokerages Nuvama and Goldman Sachs both have hold views as domestic growth remains stronger than expected and inflation has eased from recent peaks, but acknowledge that there are persistent risks stemming from global commodity markets, geopolitical tension and weather-related disruptions warrant a cautious approach.
Santanu Sengupta and Arjun Varma of Goldman Sachs also expect the central bank to leave the rates unchanged and retains the neutral stance. Although it expects RBI to modestly revise its inflation forecast lower because crude is now below the June policy assumptions, it believes policymakers will continue to emphasise caution because of geopolitical tensions and weather-related risks.
They also expect RBI to keep its growth projections unchanged or revise them marginally higher following stronger-than-expected incoming economic data. They further expect food inflation to remain the principal source of uncertainty despite relatively subdued core inflation.
Nuvama batting for status-quo argues that the RBI is likely to adopt a wait-and-watch approach as inflation uncertainties persist and it expects policymakers to carefully evaluate supply-side pressures before making any policy adjustment.
Mandar Pitale of SBM Bank India also expects a pause on the rates, saying, “though the present growth-inflation dynamics is pointing towards risks to growth with a manageable inflation trajectory in the immediate future, MPC may not considering a rate hike in a hurry but may sound cautious given higher global oil prices and poor monsoon, both of which if remain elevated will lead to hike in the second half.