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RBI Holds Repo Rate Amid Inflation Lull and Global Uncertainties
1 Oct
Summary
- RBI's Monetary Policy Committee to announce decision on October 1, 2025
- Repo rate expected to remain at 5.5% or see a modest 25-basis-point cut
- Inflation near lower end of 2%-6% target, but global economic pressures loom
The Reserve Bank of India (RBI) is set to announce its Monetary Policy Committee (MPC) decision on Wednesday, October 1, 2025. This crucial meeting will determine the direction of interest rates, inflation management, and economic growth projections for the upcoming fiscal year (FY26).
Most economists expect the repo rate to stay at 5.5%, though a few predict a modest 25-basis-point reduction. Even those favoring a hold acknowledge that there is room for the RBI to ease rates given the subdued inflation and signs of slowing growth. However, the central bank is likely to maintain a cautious stance due to the rupee's record lows and global economic pressures.
Inflation remains near the lower end of the 2%-6% target band, aided by recent tax cuts and a favorable monsoon. This provides some leeway for monetary easing, but growth concerns, especially from rising global trade tariffs, make any immediate cut a careful decision. Even if the RBI lowers rates by 25 basis points, analysts expect GDP forecasts for FY26 to remain unchanged, as monetary policy effects usually take 2-3 quarters to fully reflect in the economy.
While the repo rate may remain steady, the RBI is expected to take a dovish tone in its commentary. Economists anticipate a trim in FY26 inflation projections by around 50 basis points, which could ease bond yields and provide some market relief, while keeping the overall stance neutral.
