The likelihood of another repo rate cut by the Reserve Bank of India (RBI) in its next monetary policy meeting has increased. This meeting is scheduled to take place between August 4th and August 6th, 2025. This expectation gained strength when the Ministry of Finance, in its monthly economic review on Monday, clearly indicated that the inflation rate remains below the central bank's target. Based on this, it is stated that there is scope for further reduction in the repo rate.
From February to June 2025, the RBI has already cut the repo rate by a total of one percent, which has provided significant relief in lending rates in the banking sector. Now, there are possibilities of another cut in August.
Retail Inflation at a 6-Year Low
The Consumer Price Index (CPI)-based inflation rate in the country has been running below the 4 percent target for the past few months. In May 2025, this figure fell to 2.82 percent, which is the lowest in the last 6 years. The Ministry of Finance report stated that core inflation remains quite soft and is below the RBI's 4 percent average target. This is why the path for further repo rate cuts appears clear.
If the Repo Rate Decreases, Loans Will Become Cheaper
The repo rate is the rate at which the RBI lends short-term loans to banks. When this rate decreases, banks also start lending to their customers at cheaper rates. This makes all loans such as home loans, car loans, and personal loans cheaper, and reduces the monthly installment (EMI) for the common man. This is considered an important way to boost economic activities.
RBI's Estimate Also Shows a Soft Stance on Inflation
The RBI has projected the headline inflation rate for the second quarter of fiscal year 2025-26 at 3.4 percent. The actual inflation rate for the first quarter has been even lower than this estimate. The government has directed the RBI to maintain retail inflation at 4 percent, with a tolerance band of 2 percent. Current figures show that inflation is completely under control within this range.
The report also indicated that the inflation rate for the entire fiscal year is likely to be lower than the RBI's forecast of 3.7 percent.
Hope for Relief from the Global Oil Market Too
A major contribution to keeping inflation down comes from crude oil prices in the international market. According to the Ministry of Finance report, OPEC and its allies have increased production by 548,000 barrels per day in August 2025. As a result, global crude oil prices remain soft.
India, which depends on imports for its energy needs, is directly benefiting from this. Cheap energy is playing a major role in keeping inflation down.
Government Revenue Remains Stable Despite Tax Cuts
The report also stated that the government's revenue sources remain b. Both the central and state governments have accelerated capital expenditure while maintaining fiscal discipline. Despite cuts in tax rates, income from sources like GST, income tax, and corporate tax is showing good growth.
The Ministry of Finance says that revenue is consistently recording double-digit growth due to improved economic activity and better tax collection strategies. This is providing relief to the government and facilitating policy making to control inflation.
The Market is Also Awaiting a Potential Cut
Market experts and investors are already expecting another repo rate cut in the MPC meeting in August. Sectors like banking and real estate are now eyeing the RBI's decision. Further easing of interest rates could provide significant relief to these sectors and boost economic activity.
Possibilities Increased by the Finance Ministry Report
The Ministry of Finance's monthly report points to several important things. Inflation is under control, crude oil prices are stable, government spending is accelerating, and tax collection remains b. Looking at all these indicators, the RBI has the option of further repo rate cuts open.
The upcoming meeting of the Reserve Bank's Monetary Policy Committee could prove to be the next big step in this direction. This meeting is considered very important for millions of borrowers in the country, as its impact will directly affect their pockets.
Eyes Will Be on the Decision in the Coming Days
The RBI meeting to be held in August is now in the eyes of everyone from the general public to the industry. Will the repo rate really decrease again, will EMIs become cheaper, and will the economy get a new impetus from this — the answers to all these questions may come out next week. Until then, the market and the general public will have to wait.
