RBI Expected to Hold Policy Rate Amid Modest Inflation and Currency Pressures

On August 3 the Reserve Bank of India’s Monetary Policy Committee is projected to keep the repo rate at 5.25% for a fourth consecutive meeting. The decision will be announced on August 5.

Reserve Bank of India expected to hold rates as inflation stays in comfort zone, Reuters poll shows

The RBI faces a dual challenge: retail inflation rose to 4.38% in June, slipping above its 4% target for the first time in 17 months but staying within the 2-6% tolerance band, while core inflation remains near 4%. Wholesale price inflation surged to 9.87% in June, a potential leading indicator for consumer-price pressures.

Reuters

Global oil prices have climbed after renewed hostilities in the Gulf, pressuring the rupee, which slid to a record low ahead of the June policy meeting. Unlike Indonesia and the Philippines, which raised rates to defend their currencies, the RBI has used balance-sheet measures: scrapping capital-gains tax on foreign holders of Indian government bonds, enhancing dollar-deposit schemes for non-resident Indians, and attracting nearly $40 billion in inflows. By July 31 these programs had drawn $41 billion.

Reuters

• Retail inflation (June): 4.38%

Reuters

• Core inflation (June): ? 4%

Reuters

• Wholesale inflation (June): 9.87%

Reuters

• Interest-rate swap market pricing: ? 75 bps of tightening over the next 12 months

Reserve Bank of India expected to hold rates as inflation stays in comfort zone, Reuters poll shows

• Inflows from bond-tax and deposit measures: ? $40 billion / $41 billion by July 31

Reserve Bank of India expected to hold rates as inflation stays in comfort zone, Reuters poll shows

• RBI Governor Sanjay Malhotra told the *Hindu BusinessLine* that higher fuel prices have limited impact on broader inflation, reinforcing the view that immediate rate hikes are unnecessary.

Reserve Bank of India expected to hold rates as inflation stays in comfort zone, Reuters poll shows

• The RBI signaled a likely shift in language to acknowledge “risks of firmer inflation” while maintaining a data-dependent stance, according to Axis Bank economist Tanay Dalal.

Reserve Bank of India expected to hold rates as inflation stays in comfort zone, Reuters poll shows

• “Although core and underlying inflation have risen modestly, they remain within the RBI's comfort zone. Consequently, a rate hike is unlikely in 2026 unless core inflation sustains above 4.5%,” — Samiran Chakraborty, chief India economist

Reuters

• “If you compare India to similarly rated markets, it's not the most compelling story from a real yields perspective,” — Trinh Nguyen, Natixis

Reuters

The RBI’s policy decision is slated for August 5. The government will release Q1 FY27 GDP data on August 31, which could influence the central bank’s outlook on growth and inflation. Analysts expect at least one rate hike in the second half of FY 27, though timing remains uncertain.

RBI likely to extend rate pause; neutral stance seen unchanged