RBI maintains key rate as Trump threatens tariffs

MG News | August 06, 2025 at 11:58 AM GMT+05:00
August 6, 2025 (MLN): India’s central bank kept its policy rate steady at 5.5% Wednesday in the face of rising tariff threats from U.S. President Donald Trump.
The move was in line with expectations from economists and
comes after the Reserve Bank of India delivered an outsized cut of 50 basis
points at its last meeting in June.
RBI Governor Sanjay Malhotra, in his monetary policy
statement, said the decision was unanimous.
He noted that while global trade challenges lingered,
geopolitical uncertainties have “somewhat abated.”
The Nifty 50 index fell 0.18% after the decision, while the
Sensex dipped marginally.
The rupee strengthened marginally to trade at 87.72 against
the dollar.
The RBI’s latest move comes as India navigates rising
tensions with the U.S. over its trade ties with Russia.
On Monday, Trump criticized India for purchasing Russian oil
and weapons, threatening higher tariffs and an unspecified “penalty.”
While domestic growth remains “resilient,” the central bank
noted that the outlook for external demand is still “uncertain amidst ongoing
tariff announcements and trade negotiations.”
“The headwinds emanating from prolonged geopolitical
tensions, persisting global uncertainties, and volatility in global financial
markets pose risks to the growth outlook.”
During the RBI’s last meeting, Malhotra said that there was
limited room for monetary policy to support growth due to the 50-basis-point
cut in June.
As such, the RBI would switch its stance to “neutral” from
“accommodative.”
This means that the Monetary Policy Committee, which is the
RBI’s key decision-making body, will carefully assess the “incoming data and
the evolving outlook to chart out the future course of monetary policy,”
Malhotra said.
Analysts at Bank of America said in a July 28 note that the
RBI “took away the punchbowl from the markets” by delivering an early,
aggressive cut.
They expect the central bank to pause for now, and further
policy support will only be deployed if there is a major shift in the
macroeconomic outlook.
However, the BofA analysts left the door open for a possible
rate cut later this year likely in the fourth quarter of 2025 once the GDP
growth outlook becomes clearer.
The RBI also maintained its GDP growth forecast for its
financial year ending March 2026 at 6.5%, but cut its inflation forecast to
3.1%, down from its previous projection of 3.7%.
India’s latest inflation reading still looks supportive for
a rate cut, with the headline inflation rate in June hitting a fresh six-year
low of 2.1%.
The RBI’s Monetary Policy Committee also said on Wednesday
that the near-term inflation outlook has “become more benign than anticipated
earlier,” while inflation in 2025 is expected to remain significantly below the
central bank’s target of 4%.
Meanwhile, India’s economy expanded at a
faster-than-expected annual rate of 7.4% in the quarter ended March, sharply
higher than the 6.7% growth forecast by economists in a Reuters poll.
That quarter marked the end of India’s 2024-25 fiscal year,
which registered an overall economic growth of 6.5%, in line with the
government’s estimate.
Related News
Name | Price/Vol | %Chg/NChg |
---|---|---|
KSE100 | 144,480.97 282.66M | 1.01% 1443.80 |
ALLSHR | 89,381.92 604.98M | 1.09% 959.85 |
KSE30 | 44,486.42 152.19M | 1.11% 490.28 |
KMI30 | 205,272.58 98.95M | 0.80% 1628.49 |
KMIALLSHR | 59,768.40 232.44M | 0.93% 547.79 |
BKTi | 39,813.93 76.03M | 2.70% 1045.59 |
OGTi | 29,886.08 14.27M | 0.35% 105.67 |
Symbol | Bid/Ask | High/Low |
---|
Name | Last | High/Low | Chg/%Chg |
---|---|---|---|
BITCOIN FUTURES | 114,470.00 | 114,990.00 113,860.00 | 315.00 0.28% |
BRENT CRUDE | 68.61 | 68.78 67.74 | 0.97 1.43% |
RICHARDS BAY COAL MONTHLY | 96.50 | 0.00 0.00 | 2.20 2.33% |
ROTTERDAM COAL MONTHLY | 104.50 | 104.50 104.50 | -0.30 -0.29% |
USD RBD PALM OLEIN | 998.50 | 998.50 998.50 | 0.00 0.00% |
CRUDE OIL - WTI | 66.14 | 66.26 65.11 | 0.98 1.50% |
SUGAR #11 WORLD | 16.08 | 16.16 16.07 | -0.01 -0.06% |
Chart of the Day
Latest News
Top 5 things to watch in this week
Pakistan Stock Movers
Name | Last | Chg/%Chg |
---|
Name | Last | Chg/%Chg |
---|