In its August policy meeting, the RBI kept the repo rate unchanged at 6.5% and maintained its stance of ‘withdrawal of accommodation.’ As in the June meeting, the MPC saw divergence, with two members voting for a 25 bps rate cut and a shift to a neutral stance. The tone remained hawkish amidst uncertainty in food inflation. Regarding the outlook, the central bank retained its growth forecasts, while inflation saw some quarterly adjustments, with the Q2 inflation projection revised upwards by 60 bps. There was no change in liquidity management communication, with the bank remaining flexible in managing evolving liquidity conditions. With increased government spending and foreign inflows, liquidity conditions are expected to ease. We retain our view of a rate cut likely in Q3 but now with a higher probability assigned to December due to no signs of softening in policy tone today and upward revision in the inflation forecast for Q2.