RBI to hold policy rates unchanged in August MPC meeting despite 25 % US tariff announcement, might change stance: Economists - World News Network

By Nikhil Dedha
Mumbai (Maharashtra) [India], July 31 (ANI): Amid the new 25 per cent tariff by the US, economists believe the Reserve Bank of India (RBI) is likely to keep the key interest rate unchanged at 5.5 per cent in its upcoming Monetary Policy Committee (MPC) meeting scheduled from August 5 to 7.
In exclusive conversations with ANI, several top economists shared their expectations and forecasts ahead of the policy decision due on August 7.
Dipanwita Mazumdar, Economist at Bank of Baroda, told ANI that the RBI is expected to adopt a “wait and watch” approach in the upcoming meeting.
“For MPC, we expect a wait and watch approach as already significant frontloading has been done by RBI. Anecdotal evidence shows in an uncertain global policy space; a cautious data dependent move is more of a policy choice than any other haste move,” she said.
Economists also pointed out that the US tariffs pose a potential downside risk to India’s economic growth. Assuming a 10 per cent fall in the value of Indian exports to the US, the GDP could see an impact of around 0.2 per cent, they noted.
However, they also mentioned this as an opportunity for India to further integrate into global supply chains, particularly in South-East Asia, and improve export competitiveness in labour-intensive sectors.
Debopam Chaudhuri, Chief Economist at Piramal Group, told ANI that, “They (RBI) will maintain the rate at 5.5 per cent most likely. However, we can expect a rate cut of 25 basis points in October. The RBI may reconsider its policy stance in August though, and change it back to accommodative from neutral.”
Meanwhile, banking and market expert Ajay Bagga had a slightly different view. He believes the RBI does have space for a rate cut in the upcoming meeting.
“Monetary space is there for the RBI to cut rates by 25 basis points in its August meeting next week. We expect a rate cut,” Bagga told ANI.
Bagga also commented on the global monetary policy environment. “The US Fed, as expected, held rates constant. However, the hawkish tone in the press conference by Chair Powell led to September rate cut probabilities falling to 41 per cent. The Bank of Japan has also held rates steady this morning,” he noted.
Overall, while opinions vary, the general sentiment among economists’ leans towards RBI maintaining its current policy rate in the upcoming MPC meeting, but staying open to easing in the near term depending on how the global and domestic economic situation unfolds. (ANI)

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