RBI’s MPC meeting begins today: Loan EMI may become cheaper

RBI is holding an MPC meeting from today. The policy stance has been neutral.

After lowering interest rates by 100 basis points annually, the RBI is holding its August MPC. Today, August 4, marks the start of the three-day meeting of the Reserve Bank of India’s Monetary Policy Committee (MPC). On Wednesday, August 6, the outcome of the meeting, which was chaired by RBI Governor Sanjay Malhotra, will be made public.

The summit takes place as the US put a 25% tariff on Indian exports, creating new problems for the global trading ecosystem. all three of its policy meetings. ‘Neutral’ has been the policy stance.

A RATE CUT CHANCE REMAINS

According to experts, the MPC has good reason to think about making another cut. The US decision to increase tariffs, which could have an impact on exports and slow down economic activity, is the most recent catalyst.

There is a 35% possibility of a rate cut this week, according to Japan-based broking Nomura. It stated that an unexpected cut in August is not out of the question, even if it anticipates a 25 basis point (bps) cut in October and December.

In a note, Elaara Capital stated that while inflation is still under control, growth risks have escalated.

Time Table

We’ve seen a decline in inflation.

For the previous few months, India’s retail inflation rate has been declining. The Consumer Price Index (CPI) had its lowest level since January 2019 in June, at 2.1%. Falling food prices and a favourable comparison to last year’s high prices have caused this steep decline.

In that case, the average for the first quarter of FY26 would decline. Barclays has already lowered its full-year inflation projection to 3.5%, which is less than the 3.7% RBI had predicted. It stated that the RBI might have more leeway to promote growth as a result of the lower inflation figures.

Three times in a row, a 1% cut has been made.

This year, the RBI has lowered interest rates three times in a row by 1%. Interest rates were lowered from 6.50% to 6.25% during the February meeting. After almost five years, the Monetary Policy Committee made this decrease.

The interest rate was lowered by 0.25% at the second meeting, which took place in April. In June, the third rate cut took place. The repo rate is 5.50% at the moment. The interest rate at which banks borrow money from the RBI is known as the repo rate.

Banks receive cheaper loans when the RBI lowers the repo rate, which they then pass along to their clients. This implies that home and auto loans will drop by as much as 1% in the days ahead.