The three-day Reserve Bank of India’s Monetary Policy Committee (MPC) meeting, starting Monday, is widely expected to hold its key policy rate at 5.50 per cent.
However, a surprise cut cannot be ruled out amid US trade tariffs and low inflation, according to analysts.
The RBI has cut rates by 100 basis points since the start of the year.
The MPC meeting is scheduled from September 29 to October 1, where the central bank is expected to review interest rates. Currently, the repo rate stands at 5.5 per cent.
The RBI had left the policy rate unchanged in the previous review, but since February 2025, it has lowered the repo rate by nearly one percentage point.
According to experts, the Central Bank is anticipated to maintain the status quo on the repo rate, considering the positive impact of GST reforms on demand, stronger-than-expected Q1 FY26 GDP growth, and an inflation trajectory which is expected to slope upwards thereafter.
The inflation trajectory remained lower due to GST rationalisation (FY2026 average now around 2.6 per cent), according to credit rating agency ICRA.
GST rationalisation is unambiguously set to moderate inflation, However, this is the outcome of a policy change and will likely be accompanied by stronger demand.
This suggests a status quo for the repo rate in the October 2025 policy review, in what appears to be a close call, said Aditi Nayar, Chief Economist, ICRA.
However, with inflation poised to decline to a historical low since 2004 with GST rationalisation amid India-US trade talks back on track, a rate cut in September is the best possible option for RBI which also projects it as forward-looking central bank, an SBI report has said.
The RBI maintained the policy rate at 5.50 per cent during its August meeting, following significant easing in the prior session.
According to Dr Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India (SBI), “we believe that the bottom of CPI inflation may not yet reached, and it may further decline by 65-75 bps due to the huge GST rationalisation”.
“Inflation will continue to remain benign even in FY27 and without a GST cut, it is tracking below 2 per cent in September and October. CPI FY27 numbers are now tracking 4 per cent or less and with the GST rationalisation, October CPI could be closer to 1.1 per cent — lowest since 2004,” Ghosh noted.
