Economists anticipated at least one more repo rate cut by the Reserve Bank of India (RBI) in its upcoming monetary policy committee (MPC) review in December, as inflation based on the Consumer Price Index (CPI) eased to 0.3 per cent on-year in October from 1.4 per cent in September, marking its lowest reading in the 2011-12 base series.
The slide was driven by continued deflation in the food and beverages category as well as some dampening in core inflation.
“Given the sharper-than-expected fall in food inflation, expectations of healthy food supplies for the rest of the fiscal, benign global crude prices and the GST rate cut benefits on mass consumption items, we expect CPI inflation to average 2.5 per cent this fiscal, significantly lower than last fiscal’s 4.6 per cent,” said Crisil in its note.
Several major GST-affected categories did not show full transmission in October which implies further spillover into November.
Nov CPI is currently tracking 0.9 per cent, with a downside due to GST spillover. FY26E headline CPI is now less than 2 per cent, implying further downside of 50 bps to RBI’s forecast of 2.6 per cent.
“This could support the case for a December rate-cut (and beyond, depending on how the tariff scenario evolves). We reiterate that given the repeated undershoots versus RBI’s inflation forecasts, the policy focus on one-year-ahead inflation forecast (RBI: 4 per cent+) looks increasingly misplaced in a fast-changing environment,” said Emkay Global Financial Services in its note.
According to Aditi Nayar, Chief Economist, ICRA, the RBI monetary policy committee (MPC) is likely to pare its CPI inflation projection for FY2026 further from 2.6 per cent (as mentioned in October 2025 meeting), driven by the soft sequential momentum in food prices as well as the impact of the GST rate rationalisation on several items in the CPI basket.
She added that this, along with the dovish tone of the October 2025 policy document, would support a 25-bps rate cut in the December 2025 policy review, unless Q2 FY26 GDP growth surprises on the upside.
