The three-day closed-door Monetary Policy Committee (MPC) conference, which began on Monday (September 29, 2025), has actually raised hopes of a rate cut.
The October policy comes within weeks of a cut in Goods and Services Tax (GST) and at a time when need is most likely to be produced in the domestic market amidst the tariff pressure.
Experts are divided on whether the rate repairing panel would elect a rate cut or keep status quo, thinking about the favorable effect of GST cut on GDP development and to more control inflation.
According to Investment Information and Credit Rating Agency (ICRA), the MPC is most likely to keep status quo on the repo rate. This view is supported by the favorable effect of GST reforms as needed, stronger-than-expected Q1 FY 2026 GDP development, and an inflation trajectory that, while decreased due to GST rationalisation (FY2026 average now 2.6%), is anticipated to slope upwards afterwards.
“In ICRA’s view, the GST rationalisation might moisten the heading Consumer Price Index (CPI) prints by 25-50 basis points (bps) throughout Q3 FY2026-Q2 FY2027 relative to our pre-GST rationalisation quotes, taking the average for FY2026 to 2.6%,” stated Aditi Nayar, Chief Economist, ICRA Ltd.
“While October-November 2025 might mark a fresh low for the CPI inflation, the trajectory consequently stays upward sloping. GST rationalisation is unambiguously set to moderate inflation,” she stated.
“However, this is the result of a policy modification and will likely be accompanied by more powerful need. This recommends a status quo for the repo rate in the October 2025 policy evaluation, in what seems a close call,” she included.
“While we do think that there is minimal scope for any modification in the repo rate in this policy, there is a market view that provided the present environment, a rate cut would be required,” stated Madan Sabnavis, Chief Economist, Bank of Baroda.
“As inflation is anyhow well listed below the target of 4% both before and after GST 2.0, this can not be a main factor to consider. In Q1-FY27, inflation would be in the area of 4.3-4.4% and typical 4-4.5% for the year which suggests that the genuine rate would be in between 1-1.5% which is in accordance with this thumb guideline,” he stated.
“Also, development is anticipated to stable and be upwards of 6.5% for the year and thus there is no impending hazard to this number even after considering the tariff impact. Under these conditions we anticipate a status quo,” he included.
According to him a modification of position might most likely be thought about to relieve belief and bond yields. “If at all at a later point of time there is a bundle for exporters versus the background of tariffs, a rate cut might be thought about. We anticipate RBI to likewise modify downwards the inflation projection however leave the GDP the same,” he stated.
Barclays stated the MPC would choose a 25 bps cut in October, along with a ‘neutral’ position.
“After a neutral time out in August, we see the RBI MPC cutting policy repo rate by 25 bps in the upcoming 1 October conference, acknowledging that this is a close call versus a dovish time out, and delaying the cut to December,” the British bank stated in a note.
“Our base case for an October cut is postulated on convenience over inflation, which enables more financial easing. The current tightening up of monetary conditions and the tariff overhang clouding the development outlook in the 12 – month ahead duration are likewise factors for a forward – looking reserve bank to cut rates,” it stated.
“The tightening up of monetary conditions is likewise impeding transmission of policy reducing to monetary markets and bank financing rates. When it comes to the position, we anticipate the RBI MPC to maintain it as ‘neutral’,” it included.
Master Capital Services Ltd. stated, “Going by the aggressive rate cuts seen in the current past, expectations for the coming RBI MPC fulfill are most likely to be crafted in favour of policy stability instead of an instant rate cut.”
“The heading inflation while slipping listed below the RBI’s 4% target band, is being viewed as a short-lived phenomenon, courtesy a sharp fall in veggie costs, instead of a structural one. Thinking about worldwide tariff relocations and trade unpredictabilities likewise at play, the main bank might choose to stay mindful for now,” the company stated.
“With rates of interest cuts utilized as a stimulus tool on the domestic front through GST rationalisation, it supplies RBI area to see and examine the effect before thinking about fresh cuts,” it included.
Jyoti Prakash Gadia- Managing Director, Resurgent India (A SEBI Registered CAT 1 Merchant bank) stated, “The inflation is under control, and there is likely a more decrease in rates with the current significant cut in GST rates on customer items. This results in a benign outlook on inflation, making a case for a rate cut of a minimum of 25 bps at this phase.”
“The unpredictabilities triggered by the tariff walking by the USA are most likely to affect our professionals’ efficiency, making a damage in GDP development rates. This requires a prompt action to neutralise the unfavorable effect and put additional focus on development,” it included.
“The requirement for taking this chance to support development and most likely beneficial patterns in rates is anticipated to weigh in favour of a rate cut by 25 bps,” it stressed.