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From inflation trends to tariff concerns, here’s why the RBI pressed pause on rate changes – and what this means for your EMIs in the coming months.
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has chosen to maintain the repo rate at 5.50% during its August 2025 meeting, signalling a steady approach after earlier aggressive cuts. Between February and June this year, the RBI reduced rates by a total of 100 basis points to support growth.
For loan borrowers, deposit holders, and the wider banking system, this is a move towards economic stability rather than a sign of inaction. Here’s what drove the decision and how it could influence your loan EMIs.
Why the Repo Rate Was Left Unchanged
1. Inflation is Down, But Risks Remain
Retail inflation cooled to 2.1% in June 2025, the lowest in six years, prompting the RBI to trim its FY26 inflation forecast from 3.7% to 3.1%. This drop came on the back of softer food and energy prices.
Still, the central bank is watchful. Global gold price spikes could push inflation up, especially given India’s reliance on gold imports. Holding rates steady allows flexibility to act quickly if inflation starts rising again.
2. Tariff Pressures from Global Trade
The US has floated a 25% tariff on certain Indian exports – a move that could slow trade, weaken the rupee, and increase imported inflation.
By keeping the repo rate unchanged, the RBI preserves room to lower rates later if global trade disruptions hurt growth.
3. Strong Economic Growth Outlook
The RBI kept its FY26 GDP growth forecast at 6.5%, projecting quarterly growth as follows:
This steady outlook means there’s no urgent need for more rate cuts at the moment.
4. Bank Margins Under Pressure
With home loan rates at 7.35% and the top FD rates at 7.4%, banks already operate on tight margins. A further rate cut could squeeze profits and impact their lending ability.
5. Limited Room for FD Rate Cuts
Deposit rates have already seen declines over the past year. Cutting them more could discourage savings, which are crucial for bank lending capacity.
6. Allowing Previous Cuts to Take Effect
The 100 basis point cut between February and June 2025 is still working its way through the economy. The RBI is giving it time to influence loan rates, borrowing, and spending before making more moves.
7. Geopolitical and Commodity Price Uncertainty
Oil market swings, currency volatility, and climbing gold prices due to global tensions could quickly disrupt stability. Holding rates now means the RBI can react swiftly if conditions worsen.
What This Means for You
For Borrowers:
For Depositors:
For Banks:
What to Watch Next
The RBI will monitor:
If inflation stays soft and trade tensions ease, a rate cut in FY26 is possible.
From our perspective, keeping the repo rate unchanged is a calculated step to safeguard stability during uncertain global conditions. It lets past rate cuts filter through, protects depositors’ interests, and keeps borrowing affordable.
With the festive season around the corner, expect banks to offer:
Even without a rate cut, now is a great time to explore loan options. Try our Loan EMI Calculators to estimate repayments and optimise your savings plans.
