September 30, 2025

The three-day secret Monetary Policy Committee (MPC) meeting started on Monday, September 29, 2025, raising hopes for a rate cut. This October meeting comes just weeks after a cut in Goods and Services Tax (GST), promising fresh demand in India’s markets, even as tariff worries hover in the background. Experts have mixed feelings. Some expect RBI to keep the rates steady to manage inflation, while others want a rate cut to boost growth. The Investment Information and Credit Rating Agency (ICRA) thinks RBI will keep the repo rate unchanged. Aditi Nayar, Chief Economist at ICRA Ltd., explains that GST reforms have already pushed demand up and helped GDP growth in the first quarter of FY 2026. Inflation, though lower now thanks to GST cuts, is expected to rise again later. She said, "GST rationalisation could dampen the headline Consumer Price Index (CPI) prints by 25-50 basis points during Q3 FY2026 to Q2 FY2027," making average inflation for FY2026 about 2.6%. However, she added, "While October-November 2025 may mark a fresh low for CPI inflation, the trajectory subsequently remains upward sloping." The GST cut will ease inflation but will also boost demand, suggesting a status quo on rates in October, she concluded. Madan Sabnavis, Chief Economist at Bank of Baroda, offers a slightly different view. He says, "While we do believe that there is limited scope for any change in the repo rate in this policy, there is a market view that given the current environment, a rate cut would be warranted." He points out that inflation is already below the 4% target before and after GST 2.0 and that the real interest rate remains in a comfortable range. With growth expected to stay above 6.5% despite some tariff pressure, he also supports holding steady. But he leaves the door open: "If there is a package for exporters to tackle tariffs, a rate cut could be considered later. RBI might also lower inflation forecasts but keep GDP numbers steady." Barclays Bank is more bullish on a rate cut. They predict a 25 basis point cut in repo rate on October 1, with RBI keeping a 'neutral' stance. Barclays says, "The easing of inflation and tightened financial conditions make a rate cut a 'close call' but likely." They add that recent tariff worries and financial tightening slow down the benefits of earlier rate cuts, so RBI wants to help growth without spooking markets. Master Capital Services Ltd. advises caution. They suggest RBI might lean toward stability instead of another immediate cut because the drop in inflation is considered temporary, mainly due to falling vegetable prices. With global trade uncertainties and tariffs in play, they believe RBI will watch and wait, making sure GST cuts do their job before changing rates again. Jyoti Prakash Gadia, Managing Director of Resurgent India, backs a rate cut. He says, "Inflation is under control, and with GST cuts on consumer products, prices may fall further, supporting a 25 basis point rate cut now." He warns that US tariff hikes could hurt the economy, making RBI’s timely action to lower rates important to protect growth. So, what’s the final dance move? Will RBI hold steady or cut rates? The answer will come soon, but one thing’s clear: with GST cuts stirring up demand and inflation keeping everyone on edge, October’s rate decision is one fiery debate to watch!

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Tags: Rbi, Monetary policy committee, Interest rates, Gst cut, Inflation, Gdp growth,