Potential End to Easing Cycle Suggested by RBI's Inflation and Growth Forecasts, According to Certain Experts
The Reserve Bank of India (RBI) has halted its easing cycle as of the August 2025 Monetary Policy Committee (MPC) meeting, keeping the repo rate steady at 5.50% after earlier cuts in 2025.
This decision reflects a neutral monetary policy stance, indicating that the RBI is closely monitoring inflation and growth data before making further moves. The central bank's decision to hold rates steady comes after a significant drop in headline inflation to 2.1% in June 2025, a more than six-year low.
The RBI has also retained its real GDP growth forecast at 6.5% for FY 2025–26, signaling continued economic resilience despite global uncertainties. After cutting rates by a total of 100 basis points earlier this year, the RBI chose to hold the repo rate steady in August, citing the need to observe the inflation trend and global risks such as uncertain U.S. tariffs.
The MPC adopted a “neutral” policy stance, maintaining key rates like the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) unchanged. This indicates the RBI's readiness to adjust rates either way based on incoming data.
Prior to the August meeting, there was speculation about a possible 25 bps cut to 5.25%, but the RBI's decision to hold rates suggests the easing cycle may be over, at least for now. Several analysts, including those at Capital Economics, Bank of Baroda, Kotak Securities, Edelweiss Mutual Fund, and Shilan Shah, deputy chief emerging markets economist at Capital Economics, have expressed similar views.
Radhika Rao, senior economist at DBS Bank, predicts that the terminal rate will stay at 5.5% this year. Samiran Chakraborty, chief economist at Citi, stated that given the current policy and forecasts, there is little scope for an immediate rate cut.
Data for retail inflation in July will be released on August 12. A Reuters poll predicted one more 25 basis points cut this cycle, but some analysts are now reassessing that view in light of the RBI's decision to hold rates steady. The RBI projects a rise in inflation to 4.9% in April-June 2026.
In summary, the RBI has ended its easing cycle for the time being, pausing repo rate cuts in response to low inflation and steady growth projections amid global uncertainties. The central bank is adopting a watchful, neutral policy stance going forward, and will make further decisions based on incoming data and global economic developments.
[1] Reserve Bank of India Press Release [2] Reuters Article [3] Business Standard Article [4] Livemint Article [5] Economic Times Article
- The RBI's decision to hold the repo rate steady suggests that the growth of bonds (financial assets purchased with the aim of earning income) may be influenced by the central bank's neutral stance on inflation, as the easing cycle appears to be over for now.
- The management of capital (wealth or resources) in Indian businesses might be impacted by the RBI's decision to retain its real GDP growth forecast at 6.5%, as this scenario indicates continued economic resilience despite global uncertainties.
- Analysts at various institutions, including Capital Economics, Bank of Baroda, Kotak Securities, Edelweiss Mutual Fund, Shilan Shah, deputy chief emerging markets economist at Capital Economics, Radhika Rao, senior economist at DBS Bank, and Samiran Chakraborty, chief economist at Citi, have predicted that inflation, IRAs (Individual Retirement Accounts), and business growth will be closely monitored by the RBI as it adopts a neutral policy stance going forward.
