MPC Members Flag Tariff Uncertainties As Major Risk
“The uncertainties of tariffs are still evolving. Monetary policy transmission of the cumulative 100 basis points cut in the policy rate since February 2025, though hastened due to various measures, is still continuing": RBI Governor Sanjay Malhotra
MUMBAI: Heightened uncertainty on account of trade and tariff negotiations and with the impact of the past rate cuts still in works prompted the six-member Monetary Policy Committee (MPC) of the Reserve Bank of India to hold rates this month despite benign inflation, revealed the minutes of the policy released on Wednesday.
All the six members including the RBI Governor Sanjay Malhotra vote unanimously to keep the repo rate unchanged at 5.50 per cent at the three-day meeting held during August 4-6. The members observed that the front-loaded repo rate cut aggregating 100 basis points (bps), effected during the February to June 2025 period, is still working through the system, according to the minutes.
Malhotra said that the global economy continues to traverse a period of heightened uncertainty on account of trade and tariff negotiations and lingering geopolitical tensions and monetary policy needs to remain watchful. He said that uncertainty in external demand, driven by tariff and geopolitical uncertainty, remains the major drag on economic growth as it also hinders private investment intentions, which is yet to show visible signs of improvement.
“The uncertainties of tariffs are still evolving. Monetary policy transmission of the cumulative 100 basis points cut in the policy rate since February 2025, though hastened due to various measures, is still continuing. The CRR cut, that is likely to kick in from next month, will also facilitate further monetary transmission and stimulate economic activity. Considering all these, especially the current state of uncertainty on the external front, monetary policy needs to remain watchful. Therefore, I vote to keep the policy repo rate unchanged at 5.50 per cent,” said Malhotra.
