Recent Monetary Policy Committee Meeting
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) held its 56th meeting from August 4 to 6, 2025. During this meeting, the committee voted to maintain the policy repo rate at 5.50 per cent.
Key Decisions
The RBI’s MPC has kept the repo rate unchanged at 5.50 per cent, with the Standing Deposit Facility (SDF) rate remaining at 5.25 per cent and the Marginal Standing Facility (MSF) and Bank Rate at 5.75 per cent. These decisions were made after assessing the current and evolving macroeconomic situation.
Inflation Outlook
The inflation outlook in the near term has become more benign than anticipated earlier. The average Consumer Price Index (CPI) inflation this year is expected to remain significantly below the target of 4 per cent. This is mainly driven by lower food inflation, which entered deflationary territory in June.
Future Inflation Projections
However, CPI inflation is likely to edge up above the 4 per cent target from Q4:2025-26 onwards. Moreover, core inflation has been rising steadily from the recent low of 3.6 per cent recorded during December-January 2024-25 and averaged 4.3 per cent in Q1 this year. Core inflation, excluding precious metals, has witnessed an uptick and averaged 3.4 per cent in Q1.
Monetary Policy Path
The MPC has resolved to maintain a close vigil on the incoming data and the evolving domestic growth-inflation dynamics to chart out the appropriate monetary policy path. This decision is in consonance with the objective of achieving the medium-term target for CPI inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
Conclusion
In conclusion, the Monetary Policy Committee’s decision to maintain the policy repo rate at 5.50 per cent reflects the committee’s effort to balance the need to control inflation with the need to support economic growth. The MPC will continue to monitor the situation closely and make adjustments as necessary to ensure that the economy remains on a stable growth path.
