The Reserve Bank of India (RBI), which has already brought relief through multiple rate cuts this year, may continue this trend in its upcoming monetary policy meeting. According to a report by ICICI Bank, the repo rate could be reduced by another 25 basis points (0.25%), bringing it down to 5.25%.

Why a Rate Cut Now?

ICICI Bank cites a mixed economic outlook:

• Urban consumer demand remains weak.
• Rural demand is still strong.
• Exports to the US are slowly improving.
• Other exports have not yet met expectations.

Given this backdrop and easing inflation, ICICI believes August could be the right time for another rate cut.

Inflation Outlook Improves

ICICI estimates that inflation may fall to 2.9% in FY 2025-26, significantly below the RBI’s earlier estimate of 3.7%. Lower inflation strengthens the case for a rate cut.

RBI’s Recent Rate Cut History

The RBI has already:

• Cut 0.25% in February
• Cut another 0.25% in April
• Cut 0.50% in June

This totals a 1% reduction in the repo rate over three consecutive policy reviews.

What It Means for Borrowers

Since repo rates influence loan interest rates:

• Banks may reduce home, auto, and personal loan rates.
• If banks pass on the benefit, monthly EMIs for borrowers could decrease.
• A further cut in August would provide additional relief to the common man.