RBI MPC meeting: Why economists predict policy rate pause at 5.25% on August 5 

Economists  believe that the RBI is likely to keep the repo rate unchanged at 5.25% in the upcoming monetary policy meeting. 

RBI likely to stay on hold: IDFC First Bank 

Economists pointed out that the current account deficit remained below 1% of GDP for the last three years and core data, CPI inflation remaining close to historical lows. IDFC First Bank believes that the Monetary policy is not the appropriate tool to deal with supply-side shocks, “The policy space to remain on pause is derived from the fact that the crisis comes at a time when there is excess capacity in the economy,” they added. 

According to them, the “fiscal policy will be the first line of defence in dealing with supply-side shocks. The Government and OMCs have absorbed the majority of the fuel price shock. Given the nature of the shock, we maintain the expectation of RBI remaining on pause in FY27.” 

RBI to prioritise liquidity management: Nuvama

Economic observers at Nuvama said that the policymakers are likely to keep the repo rate unchanged as they will prioritise liquidity management over rate action in the near term. 

“The policy stance is anticipated to remain calibrated and flexible,allowing the RBI to respond to incoming data and external shocks.” Nuvama noted.

“The RBI is likely to continue to assess the economic impact of the ongoing West-Asia conflict, evolving inflationary pressures and monetary stance of major central banks, especially the Fed,” Nuvama added.

Low inflation gives RBI room to support growth: Nomura 

Nomura also believes that the RBI may extend its no action stance and keep rates on hold this time.

“With inflation tracking below the RBI’s FY27 forecast of 5.1% and continued uncertainty in the Middle East, we believe MPC members are likely to utilise the buffer offered by subdued underlying inflation to keep their focus trained on minimizing the damage to growth,” Nomura noted.

They believe the host of external sector measures to attract capital inflows suggests little appetite for the RBI to dilute its inflation-targeting mandate by mounting an interest rate defence of the currency. They maintain the view that the “RBI will be on an extended policy hold through the year.”

Equirus expects 25 bps RBI rate hike in December 

Maulik Patel, Head of Research at Equirus Securities, said he believes the MPC will keep policy rates unchanged this time, as it could see an uptick in wholesale and retail inflation due to increases in petrol and diesel prices, second-order effects, and the impact of weather disturbances on food prices.

“CPI for the full year is estimated at 4.9% owing to these pressures, with upside risks. Developed market (DM) central banks have started hiking rates, and the recent FOMC meeting has raised expectations of a Fed rate hike as soon as December. Hence, that is another variable that the RBI needs to consider while determining the timing of a hike. We continue to expect a 25 bps hike in the December policy,” Equirus Securities noted.

RBI MPC June meeting- recap

In the previous meeting held in June, when the Middle East war was pushing crude prices higher, the MPC unanimously decided to keep the policy repo rate unchanged at 5.25% while retaining the neutral policy stance. The repo rate was last reduced by 25 basis points, from 5.50% to 5.25%, in December 2025. 

Conclusion

This is the third bi-monthly monetary policy review of FY27. The meeting comes against the backdrop of El Niño affecting the monsoon and raising inflation risks, along with geopolitical tensions and crude oil price volatility.

Will the RBI hold policy rates this time? Stay tuned to FinancialExpress.com for all the latest updates. We will bring you live coverage of the policy announcement, along with expert analysis and economists’ commentary.