RBI Likely to Hold Rates at 5.50% on August 6 Amid U.S. Trade Tensions and Cooling Inflation

Economists expect the Reserve Bank of India (RBI) to maintain its benchmark repo rate at 5.50% during its upcoming monetary policy meeting on August 6. A recent Moneycontrol poll of 17 economists, fund managers and bank treasurers suggests that policymakers will adopt a cautious stance amid ongoing trade negotiations with the United States.

The poll indicates that RBI may prefer a “wait and watch” approach to assess the impact of recent global uncertainties — including the imposition of 25% tariffs on Indian exports by the U.S. and unresolved bilateral trade talks — before considering any rate move. The current trade tensions may cloud the growth outlook, making a rate pause more prudent despite easing inflation.

Supporting this view, Reuters reported that while most economists expect no policy change, the probability of a future rate cut has risen following the tariff shock, even as inflation remains subdued. India’s retail inflation dropped to a six-year low in June, and although further cooling is expected, concerns about growth persist.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Other sources, including The Economic Times, reinforce market sentiment that the RBI’s Monetary Policy Committee (MPC) will likely maintain the current neutral stance. The central bank's recent shift from an "accommodative" to a "neutral" posture, following a sharper-than-expected 50-basis-point cut in June, signals that any additional easing will be data-dependent.

Growth Momentum Remains Robust

India posted 7.4% GDP expansion in Q1—but headwinds from trade uncertainty and a stronger dollar pose risks. Analysts believe the RBI will use the August meeting as a "pause" to evaluate incoming data on inflation, bank credit, rural demand and international policy shifts. A possible 25-basis-point cut later in the year remains feasible, depending on how trade talks evolve and monsoon-driven inflation trends behave.

Conclusion

With U.S. trade talks still unfolding and inflation at a multi-year low, most economists anticipate the RBI will retain the repo rate at 5.50% on August 6. The central bank appears ready to wait for clearer indicators on growth, foreign trade and inflation before embarking on further monetary easing.