New Delhi [India], August 3 : The RBI has already frontloaded the rate cuts, anticipating the moderation in inflation, and it is unlikely the central bank would go for further rate cuts unless economic growth concerns aggravate, CareEdge said in a pre-monetary policy review meeting.
While the US reciprocal tariff rate (25 per cent for India) and proposed penalty are concerning, the RBI may opt to wait till "we get further clarity on this front", the rating agency said.
The next bi-monthly RBI monetary policy review meeting is scheduled for August 4-6, 2025.
"With a forward-looking outlook, the RBI would be focusing on inflation in the quarters ahead," the report read.
With CPI-based retail inflation expected to breach 4 per cent in Q4 2025-26 and average 4.5 per cent in 2026-27, the real policy rate would settle in the range of 1-1.5 per cent at the current repo rate, it asserted.
"Therefore, a rate cut in the upcoming policy meeting appears unlikely. Given the incomplete transmission of the previous rate cuts, the RBI is expected to hold off on further easing, allowing time for the full impact of earlier measures to materialise," the report read.
"With the RBI having already frontloaded rate cuts and ensured ample liquidity, the MPC may prefer to pause for now and assess how the macroeconomic landscape evolves. Additionally, transmission of the previous rate cuts is still underway and could take some more time to show its effect on the economy."
The upcoming monetary policy meeting in August takes place against the backdrop of a notable moderation in headline inflation in recent months, largely driven by easing food prices.
Inflation is projected to average below the 4 per cent target over the next two quarters, supported by a favourable base and muted food inflation.
The global trade policy uncertainty will continue to cast a shadow on India's growth outlook; however, the overall impact is likely to be limited given India's limited merchandise trade exposure to the US economy, CareEdge noted.
After a total of 100 basis point repo rate reduction since February 2025, the scope for more rate cuts was limited, RBI Governor Sanjay Malhotra had hinted after the latest monetary policy meeting. The recent frontloaded repo rate cut by the RBI was understandably aimed at boosting economy, which has relatively moderated.
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