August 2025 MPC Update: RBI Keeps Rates Steady, Monitors Transmission

byPaytm Editorial TeamLast Updated: August 7, 2025
RBI Guidelines for UPI Frauds in Banks

Source: RBI Press Release

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

Following an assessment of the current economic and financial environment, the MPC unanimously decided to keep the repo rate unchanged at 5.5%. This decision aligns with the RBI’s medium-term goal of maintaining CPI inflation at 4% (±2%), while supporting overall economic growth.

Policy Decision: Repo Rate Held Steady at 5.5%

After reviewing the current and expected macroeconomic situation, the MPC unanimously voted to maintain the policy repo rate at 5.50%. The move aligns with RBI’s objective of achieving consumer price index (CPI) inflation of 4% within a ±2% band while supporting economic growth.

Policy Rates as of August 6, 2025

Global and Domestic Economic Outlook

The global environment remains challenging, even as financial market volatility and geopolitical risks have eased from earlier highs. Global trade negotiations continue to face hurdles. While the IMF has revised global growth upward, overall recovery remains muted, and disinflation is slowing. Some advanced economies are even seeing a rise in inflation again.

Domestic Economy: Resilient and Broad-Based

India’s economy continues to show resilience, evolving as expected. Economic activity is being boosted by:

  • Private consumption, helped by improving rural demand
  • Fixed investment, supported by government capital expenditure
  • A steady southwest monsoon, aiding agriculture and reservoir levels
  • Strong performance in services and construction

However, the industrial sector remains uneven, particularly in electricity and mining.

GDP Growth Outlook: Projection Retained at 6.5%

The growth forecast for FY 2025–26 remains unchanged at 6.5%. Strong monsoon conditions, lower inflation, robust government spending, and healthy financial conditions are expected to support growth. The services sector is expected to remain buoyant.

Yet, external demand may remain weak due to ongoing tariff announcements, geopolitical tensions, and financial market volatility.

Real GDP Growth Projections

The risks to the outlook are considered evenly balanced.

India’s CPI inflation fell for the 8th consecutive month, reaching a 77-month low of 2.1% year-on-year in June 2025, primarily due to:

  • A sharp drop in food inflation, due to:
    • Better agricultural activity
    • Various supply-side measures

Food inflation even entered negative territory (-0.2%) for the first time since February 2019. High-frequency indicators suggest this lower price momentum continued into July.

Core Inflation: A Modest Rise

While overall inflation dropped, core inflation rose to 4.4% in June, driven partly by increasing gold prices. Between February and May 2025, core inflation had remained in a narrow 4.1–4.2% range.

Inflation Outlook for FY 2025-26

The overall inflation outlook is more favourable than in June, supported by:

  • Large base effects
  • Good monsoon progress
  • Healthy kharif sowing
  • Adequate foodgrain stocks

However, CPI inflation is expected to rise above 4% from Q4 onwards, due to base effects and policy-driven demand. Core inflation may stay moderately above 4% for most of the year, barring any major shocks.

CPI Inflation Projections

Rationale Behind the Policy Decision

The MPC provided the following reasons for maintaining the current repo rate:

  • Headline inflation is much lower than expected earlier, primarily due to volatile food prices, especially vegetables.
  • Core inflation remains stable around 4%, as anticipated.
  • While growth remains strong, it is still below long-term aspirations.
  • Tariff uncertainties and external pressures are still evolving.
  • Transmission of monetary policy is ongoing – the impact of the 100 basis point rate cuts since February 2025 is still unfolding across the economy.

Important Upcoming Dates

  • The next MPC meeting is scheduled from September 29 to October 1, 2025
  • MPC Meeting Minutes will be released on August 20, 2025

Author

Paytm Editorial Team

The Paytm Editorial Team is a collaborative group of writers, editors, and industry experts. We're dedicated to bringing you the latest insights, news, and guides on digital payments, financial services, and the technology that's shaping India's economy. We offer easy-to-follow guides and insights to help you explore Paytm’s products, features, and services. Our goal is to provide clear, reliable, and helpful information to empower you on your financial journey.

FAQs

What is the current repo rate after the August 2025 MPC meeting?

The repo rate remains unchanged at 5.5%, as decided in the August 2025 RBI Monetary Policy Committee (MPC) meeting.

Why did the RBI keep the repo rate unchanged?

The RBI held the repo rate steady due to record low inflation (2.1%), stable core inflation, and the need to support ongoing economic growth while allowing recent rate cuts to fully transmit through the system.

What is India’s GDP growth forecast for FY 2025–26?

The RBI has retained the GDP growth projection at 6.5% for FY 2025–26, backed by a strong monsoon, robust government spending, and healthy domestic demand.

Will inflation remain low throughout the year?

No. While CPI inflation is low now, the RBI expects it to rise above 4% from Q4 FY 2025–26 onwards due to base effects and demand-side factors.
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