The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) started its bi-monthly meeting on Monday, which will last two days, with the rate decision to be announced on Wednesday, October 1.
Representative Image (IANS)
The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) started its bi-monthly meeting on Monday, which will last two days, with the rate decision to be announced on Wednesday, October 1.
A recent research report by the State Bank of India (SBI) said the MPC should go for a 25 basis points (bps) cut in the key policy rate, calling it the “best possible option”.
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In the last MPC meeting held between August 4 and 6, the RBI MPC announced that the repo rate was kept unchanged at 5.5 per cent, after three consecutive cuts since February.
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Since August, multiple changes have taken effect as the US tariffs continue to remain in place; the GDP surpassed expectations in the June quarter at 7.8 per cent. Also, the new GST reforms came into effect from September 22.
Economists also believed that the core inflation, which indicates excess demand pressure, remains low by historical standards despite the significant impact of rising gold prices. The rationalisation of GST rates will also likely contribute to reducing inflation further.
A recent study published in the RBI’s latest Bulletin said the pass-through of the cumulative 100 bps reduction in the repo rate during February to August 2025 to lending and deposit rates has been robust.
IDFC First Bank, in a report, also said that from a real rates perspective, there is space to cut, but the need will depend on growth risks. The GST cut gives a 0.6 percentage point lift to GDP, but escalating US trade tensions could shave off as much as 1 percentage point.
“RBI is likely to wait for clarity post-festive season and cut in December if downside risks materialise.”
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