As the Reserve Bank of India’s Monetary Policy Committee (MPC) convenes from September 29 to October 1, market expectations largely point to a pause in policy action. However, some economists and banks are cautiously pricing in the possibility of a 25 basis points cut.
Nearly three-quarters of economists anticipate a rate hold, citing policy consistency, inflation stability, and global pressures. Yet others have floated the possibility of a surprise cut, arguing that weakening demand and headwinds from U.S. tariffs and export stress may warrant pre-emptive easing.
India’s economy had posted a robust 7.8% GDP growth in Q1, but analysts warn that the figure may overstate underlying momentum due to base effects and lag in supply adjustments. Inflation, meanwhile, is hovering below the RBI’s 4% target but faces upward pressure from commodity prices and food inflation.
A hold would allow greater time for monetary transmission of prior rate cuts, which total 100 basis points so far in 2025. But with global uncertainties mounting — particularly U.S. trade policy and export disruptions — the RBI may be tempted to act.
Market watchers warn that any surprise cut would likely trigger rallying in equities and bonds, while a hold or hawkish tone may pressure yield curves. The RBI’s communication strategy will be critical in managing market expectations.