RBI MPC: Malhotra & co flag lingering trade woes as India-US deal stalls, Trump revives tariff threats

Trade negotiation challenges continue to cast a shadow over the global outlook, the Reserve Bank of India’s Monetary Policy Committee (MPC) observed on Wednesday, noting that despite easing geopolitical tensions and market volatility, uncertainties persist, especially with the US deal hitting a roadblock amid renewed tariff threats from Donald Trump."The global environment continues to be challenging. Although financial market volatility and geopolitical uncertainties have abated somewhat from their peaks in recent months, trade negotiation challenges continue to linge," said RBI Governor Sanjay Malhotra while announcing the MPC's decisions. In this backdrop, the MPC, chaired by Malhotra, unanimously decided to keep the benchmark repo rate unchanged at 5.5% in its latest policy review. The committee also retained its Neutral stance. As a result, the Standing Deposit Facility (SDF) rate remains at 5.25%, while the marginal standing facility (MSF) and bank rate stay at 5.75%.This status quo follows three consecutive rate cuts since February, totaling 100 basis points, and comes just ahead of the festive season—a period typically associated with rising credit demand. The RBI’s decision reflects a balancing act: while inflation is moderating, with Consumer Price Index (CPI) inflation falling to 2.1% in June, the external environment remains volatile.The US government’s move to impose a 25% tariff on Indian imports starting August 7 has heightened concerns, with the central bank noting that trade uncertainties "continue to linger." Some economists had anticipated a pause in rate action, citing slowing domestic growth momentum and easing consumer prices. Meanwhile, sectors such as housing, retail, and MSMEs had lobbied for further easing to support consumption through the second half of the year.