RBI’s MPC minutes show that tariff uncertainty, rate transmission allowed status quo in August

Reserve Bank of India

The current uncertainty on the external front and ongoing transmission of the rate action by Reserve Bank’s Monetary Policy Committee (MPC) allowed the central bank to maintain the status quo in August, said the minutes of the MPC meeting, released on August 20.

“The current state of uncertainty on the external front, monetary policy needs to remain watchful,” the MPC minute quoted Sanjay Malhotra, the RBI Governor.

Additionally, Nagesh Kumar, an external member of the RBI's MPC said that while the case for stimulating private investments and urban demand remains, along with a benign inflation outlook, the MPC may wait and watch for the transmission of existing actions and how the tariff uncertainties play out, before considering policy actions at the October meeting.

The central bank in August monetary policy had kept the repo rate unchanged at 5.50 percent

as the central bank continues to monitor US President Donald Trump’s fresh tariff threats. The rate-setting panel also unanimously decided to keep the policy stance 'neutral'. This was after the MPC had already lowered the repo rate by 100 basis points between February and June 2025.

The governor during the policy had said that over the medium term, Indian economy holds "bright prospects" amid a changing world order drawing on its inherit strength, robust fundamentals and comfortable buffers. "The coordinated use available with us helps accelerate monetary policy transmission in current easing cycle," he said.

On Trump's tariff threats, the governor signalled that the central bank is keeping an eye on the situation as the "uncertainty over tariffs are still evolving".

The central bank maintained its GDP growth projection at 6.5 percent for FY26. The CPI inflation was revised downwards to 3.1 percent for the fiscal from the earlier projected 3.7 percent.

Ram Singh, an external member of the RBI's MPC said Going forward, several factors are expected to provide comfort: an increase in the flow of funds to the private sector through bond markets and non-banking channels, a super-healthy corporate balance sheet, high levels of PMIs for the
manufacturing and services sectors, and rising capacity utilisation. The above-normal monsoon, low inflation, supportive monetary, regulatory, and fiscal policies, along with the onset of the festival season, are expected to support growth by boosting demand. The sustained growth rates in construction, trade and a broad range of services sectors are expected to remain buoyant in the coming months, supporting the growth.

However, Ram sing added that there are also some stress signs associated with achieving a 6.5% growth rate.