With US Tariff Pressure Mounting Will RBI MPC Maintain Status Quo?

While most analysts expect Reserve Bank of India's MPC to adopt a wait and watch approach when it comes to rate cut, brokerage firm Emkay argues that there are several reasons for India's apex bank to deliver a further 25 bp basis (points) easing in August.

The RBI's MPC meet is scheduled to kick-off on Wednesday, August 6, 2025 at 10:00 am.

"There are enough reasons for the RBI to deviate from its previous guidance, deliver a further 25bp easing in August, and be more open-ended in its policy approach/guidance for further easing ahead," said Emkay.

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Can Downside Risks Make RBI Execute A Rate Cut?

The current state is "in a persistent chicken-and-egg situation" in terms of "investment as well as consumption".

"The recent US tariff hit of over 25 per cent on India has further skewed risks for India relative to Asian peers, even though we reckon that those securing trade deals are not necessarily any better-off," Emkay said.

"Together, these internal and external headwinds pose downside risks to the RBI’s FY26 growth forecast of 6.5 per cent, underscoring the need for continued policy support," the brokerage firm announced.

However, several other experts are of the opinion that RBI MPC chaired by RBI Governor Sanjay Malhotra should adopt an approach that's consistent with its own guidance, following the "front-loaded 50bps rate cut" in June.

On the other hand, there's a section that argues that further rate cuts could weigh on foreign portfolio investor (FPI) debt flows, given narrowing interest rate differentials with the US and reduced risk premia.

"However, India’s exposure to FPI debt remains limited 3.0 per cent, and FPI flows are typically driven more by equities—anchored in growth differentials with EM peers—than by interest-rate gaps," it said.

Currently, Indian class assets regardless of Trump's tariff bomb have indicated stability, "minimizing financial market volatility and, by extension, limiting disruptions to the RBI’s policy response."