RBI Monetary Policy Statement 2025-26: Full Analysis

The 56th meeting of the Monetary Policy Committee (MPC) took place from August 4–6, 2025, chaired by Shri Sanjay Malhotra, Governor of the Reserve Bank of India (RBI). The other members present included Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta, and Dr. Rajiv Ranjan.

The MPC’s core decision: keep the repo rate unchanged at 5.50%.

• Standing Deposit Facility (SDF): 5.25%
• Marginal Standing Facility (MSF) & Bank Rate: 5.75%

The decision aligns with the RBI’s goal of maintaining CPI inflation at 4% within a ±2% range while supporting economic growth.

Growth Outlook

Global Scenario: Global growth remains muted despite an upward revision by the IMF. Disinflation has slowed, and some advanced economies are witnessing an uptick in inflation. Trade negotiations and tariff changes remain a concern.

Domestic Economy: Economic growth is resilient, driven by private consumption (especially rural demand) and fixed investment (supported by strong government capital expenditure).

1. Agriculture: Supported by a steady southwest monsoon and strong kharif sowing.
2. Services Sector: Continues to perform well, led by construction and trade.
3. Industrial Sector: Growth uneven; electricity and mining are lagging.

GDP Growth Projection 2025-26: 6.5%

1. Q1: 6.5%
2. Q2: 6.7%
3. Q3: 6.6%
4. Q4: 6.3%
5. Q1 2026-27: 6.6%

Inflation Outlook

Current Situation (June 2025):

1. CPI inflation at 2.1% (77-month low) – eighth consecutive month of decline.
2. Food inflation in negative territory (-0.2%) for the first time since February 2019 due to good agricultural output and supply-side measures.
3. Core inflation rose slightly to 4.4% in June, partly due to rising gold prices.

Projection for 2025-26: 3.1%

1. Q2: 2.1%
2. Q3: 3.1%
3. Q4: 4.4%
4. Q1 2026-27: 4.9%

Key Risks:

1. Weather-related shocks affecting crops.
2. Global uncertainties and trade disputes.
3. Demand pressures from policy measures in later quarters.

Rationale for Keeping Repo Rate Unchanged

1. Inflation Control: Inflation is currently below target but expected to rise above 4% in late FY2025-26 due to seasonal and demand-side factors.
2. Economic Growth Stability: Growth remains in line with projections at 6.5% for 2025-26.
3. Impact of Previous Rate Cuts: RBI has already reduced rates by 100 basis points since February 2025. The full benefits of these cuts are still filtering through the economy.
4. Uncertain Global Conditions: Tariff and trade tensions could affect exports and global capital flows.
5. Neutral Monetary Policy Stance: MPC will monitor data closely before making future changes.

Key Takeaways for Exam Preparation

• Repo Rate: 5.50% (unchanged)
• GDP Growth 2025-26: 6.5%
• Inflation 2025-26: 3.1% (expected to rise above 4% in Q4)
• Reason for no rate change: Waiting for earlier cuts to take full effect; inflation likely to rise later.
• Major Risks: Weather shocks, trade tensions, global inflation trends.
• Next MPC Meeting: September 29 – October 1, 2025.