RBI repo rate decision August 2025 holds at 5.5% amid US tariff shock, global trade risks, and lowered growth forecast.
The Reserve Bank of India (RBI) has kept the policy interest rate unchanged at 5.5% in its August 2025 review, despite mounting global economic risks and the central bank’s Monetary Policy Committee (MPC), led by RBI Governor Sanjay Malhotra, voted unanimously to maintain a ‘neutral’ policy stance and this decision comes as India faces heightened global headwinds, including a fresh trade disruption after US President Donald Trump imposed a 25% duty on all Indian exports to the United States and the RBI also downgraded India’s GDP growth forecast for FY2025 from 6.7% to 6.5%, citing evolving risks from trade tensions and geopolitical volatility.
The six-member MPC assessed both internal and external challenges before arriving at the decision to hold the repo rate. Governor Malhotra said the outlook for global demand remains uncertain, especially in light of shifting tariff regimes and unresolved trade negotiations.
He acknowledged that persistent geopolitical tensions and volatile financial markets were weighing heavily on growth projections. Although he avoided direct reference to Trump’s tariff hike, Malhotra did admit that such uncertainties have already influenced the RBI’s revised outlook.
Read More: Trump’s Tariff Gambit: Forcing a Rethink in India-China Ties?
The RBI’s cautious stance followed Trump's dramatic trade move on Thursday — a 25% tariff on all Indian goods, along with a warning of further penalties if India continues buying Russian oil where this escalation threatens to undermine India’s export sector and complicates economic recovery at a time when global trade flows remain fragile.
India has labelled these actions as unjustified. But the RBI prefers to remain data-dependent rather than respond with any policy panic.
Despite the external turmoil, Malhotra struck a note of optimism about India’s domestic economy. He said robust fundamentals, structural strengths, and policy buffers have kept the Indian economy on a “steady growth path.”
The central bank has lowered its inflation forecast from 3.7% to 3.1%, though it anticipates some rise in headline inflation toward the end of the year. Malhotra also emphasised that the RBI is using the policy space created by stable inflation to support growth while maintaining price stability.
The RBI Governor assured that the central bank will remain agile and proactive, he stressed the need for coordinated policy action beyond just monetary levers to secure India’s global position.
“We will continue to provide a facilitative monetary policy based on incoming data,” he said. “Strong frameworks across all domains will be key to India’s long-term journey.”
The RBI has chosen steadiness over reaction. But with Trump’s aggressive trade measures shaking global stability, the coming months may test the resilience of India’s monetary strategy.
Read More: India Faces $64B Export Risk as Trump Tariffs Hike
