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Investing.com - The Reserve Bank of India (NSE:BOI) (RBI) is expected to maintain its repo rate at 5.50% during its upcoming Monetary Policy Committee meeting on August 6, despite a sharp decline in headline inflation in June, according to Capital Economics.
The significant drop in inflation has prompted speculation about potential additional interest rate cuts following the RBI’s substantial 50 basis point reduction in June. However, Capital Economics believes the central bank will likely keep rates unchanged.
Capital Economics noted that the RBI had clearly signaled after its June meeting that the easing cycle was complete, establishing what the research firm describes as a "high bar" for further rate cuts. This stance suggests the recent inflation data may not be sufficient to trigger additional monetary easing.
The economic research firm projects that the repo rate will remain at its current level of 5.50% not only at next week’s meeting but "well into 2026," indicating an extended period of rate stability ahead for India’s economy.
The RBI’s decision comes amid a balancing act between responding to lower inflation figures and maintaining its previously communicated policy trajectory, with the central bank having already implemented significant monetary easing through its June rate cut.
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