The bar for rate cuts still remains high if one looks at the forward guidance on inflation and may not get delivered unless growth staggers significantly
FinTech BizNews Service
Mumbai, October 2, 2025: The Monetary Policy Committee (MPC) held its 57th meeting from September 29 to October 1, 2025, 2025 under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India. The MPC members Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta and Shri Indranil Bhattacharyya attended the meeting.
Vikram Chhabra, Senior Economist, 360 ONE Asset:
“The latest RBI policy decision was a hard call to make. Q1 GDP growth exceeded expectations, though part of the upside came from a statistical boost due to low inflation. Underlying momentum remains weak, with volume indicators muted, though some support is likely from recent GST reductions.
On the inflation front, the surprise has been on the downside, and further moderation is expected as GST cuts filter through, even if the one-off nature of the price impact should be discounted.
Against this backdrop of lingering economic uncertainty, the RBI has opted for a dovish pause in this meeting, indicating that policy space has opened up to support growth further. Accordingly, we expect additional monetary easing, with a 25-bps rate cut likely in the next policy meeting.”
Radhika Rao, Executive Director and Senior Economist at DBS Bank:
The RBI Monetary Policy Committee (MPC) unanimously kept the repo rate unchanged at 5.5%, in line with our expectations. The policy corridor was maintained, with the Standing Deposit Facility (SDF) rate remaining at 5.25%, while the Marginal Standing Facility (MSF) rate and the Bank Rate remained at 5.75%. While the stance remained 'neutral', two external members cast dissent votes in favour of a change in stance to 'accommodative'. The economic assessment was balanced, with the FY26 GDP growth revised up by 30bp to 6.8% year-on-year, while inflation was lowered by 50bp to 2.6%. The global economy was seen as being resilient, while the MPC cited the strong domestic growth outcome for 1QFY26 (see report).
In line with our expectations, 2QFY growth is pegged at 7% year-on-year. Policy guidance was moderately dovish. There were two signs that policy room had opened up. Firstly, the RBI highlighted that 'current macroeconomic conditions and the outlook have opened up policy space for further supporting growth,' suggesting the path ahead will be data-dependent. Secondly, the divide in the voting for the stance reflects dovish undercurrents amongst a few of the MPC members.
The MPC is likely to be guided by growth rather than inflation. Risks from external developments are likely to subside if there is a successful trade deal between the US and India. We include one rate cut in our trajectory for the rest of FY26 to a terminal rate of 5.25%, with a move likely in December. Policymakers might opt to undertake open market operations to restrain bond yields/SDLs rather than utilise monetary policy levers.”
Mr. Indranil Pan, Chief Economist at YES BANK:
Most prudently RBI continues to hold policy rate and stance, as MPC members navigate through the continued uncertainties in both global as also domestic economic landscapes. No doubt growth is proving to be resilient with good monsoons, and GST cuts expected to push up domestic consumption, that is expected to boost demand for private investments. However, challenges persist due to geopolitical tensions and trade policies. It remains to be seen how these impact domestic growth from the consumption side, as most of the export related sectors are labour intensive and could shed manpower to factor in loss of export market. The inflation story for India remains conducive with continued soft and declining food prices. The latest push for inflation to ease further is the GST rationalization that will reduce prices of products that find place within the CPI basket. But, base effects are likely to hit from Q4 of FY26 and inflation, as per the Monetary Policy Report, is likely to rise to 5.1% in the next financial year. While the policy statement provides a dovish tone and has opened up a realistic chance for the next cut in December, the bar for rate cuts still remains high if one looks at the forward guidance on inflation and may not get delivered unless growth staggers significantly. This policy is also quite heavy in regulatory announcements that seek to enhance flow of credit and improve competitiveness of banks, scope for acquisition funding and infrastructure funding was enhanced and boundaries of the NBFC and banks was reduced, all of which is expected to drive growth.”
