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Informist, Tuesday, Sept. 30, 2025

MUMBAI – Following are the expectations of economists from the meeting of the Reserve Bank of India's Monetary Policy Committee, which began Monday. The committee's decision will be announced on Wednesday.

GOLDMAN SACHS

In our baseline, we expect another 25-basis-point cut in December, taking the repo rate to 5.25%, supported by a benign inflation outlook. Our US economists' view is of a more dovish Fed path relative to market pricing, and our foreign exchange strategy team's expectation is of renewed US dollar weakness. As a risk case, if the RBI views growth risks from trade-policy uncertainty as more skewed to the downside, or judges the pass-through of GST rate cuts to inflation as higher than our estimates, the MPC could bring forward the 25 bps cut to October.

ICICI BANK

MPC is likely to sound optimistic on this year's inflation outlook. Hence, we expect a dovish pause in this policy. If growth slows down later in the year, MPC is likely to use the room available to cut rates later than now, when fiscal policy is driving growth higher

After front-loading rate cuts and announcing liquidity measures, the RBI should take comfort from recent indicators, which show India's growth has been resilient. Outlook for domestic consumption is positive after GST cuts, which should pull down prices and thus bring down inflation even further. With low inflation this year, RBI can show its comfort on the inflation front even as it goes up next year on a low base. Hence, the rationale to ease policy any further would be contingent on growth outlook, which is looking up due to domestic demand when the global environment is uncertain. Not only there is an overhang of tariffs, but also excess capacity in China which is a disincentive for anyone to build new capacity. Hence, if trade negotiations take time and thus the slowdown in external demand spills over to domestic sentiment or demand, the MPC should use the room to cut policy rates to spur growth. When growth has an upward bias from RBI's estimate of 6.5%, MPC shouldn't be in a hurry to cut rates. Instead, the focus should be on transmission of earlier rate cuts.

ICICI SECURITIES PRIMARY DEALERSHIP

The upcoming RBI MPC meeting is set in the context of plethora of domestic and global cross currents with potential implications for monetary policy. While on balance, these have increased the probability of a rate cut in the October meeting, we believe a status quo policy is still more likely.

Given the uncertainty around tariffs and potential further actions by the US, we consider it best that RBI stays conservative and only tweaks growth estimate modestly higher, say by 20 bps. That would help RBI MPC to retain the optionality to ease monetary policy in later meetings, starting December in case the high tariffs turn out to be persistent. Waiting till the December meeting provides RBI MPC with the opportunity to assess impacts of both tariffs and GST cuts on growth as well as the extent of pass-through to inflation from the latter. Tactically as well, cutting rates ahead of most benign inflation prints may be fraught with some risk for the committee as the bond market may assume there has been a significant shift in central bank reaction function after signalling a high bar to ease in previous meetings.

ICRA

GST rationalisation could dampen headline CPI prints by 25-50 bps during Oct-Dec to Jul-Sept relative to our earlier estimates. While the average CPI inflation for FY26 is now likely to print around 2.6% and the October-November prints may mark a fresh low, the trajectory subsequently remains upward sloping. This, in conjunction with the stronger-than-expected GDP growth in Apr-Jun, and the positive impact of the GST reforms on demand suggest a status quo for the repo rate in the October policy review.

CAREEDGE RATINGS

With the RBI having already front-loaded rate cuts and ensured ample liquidity, the MPC may prefer to pause at this stage and assess how the macroeconomic landscape evolves. While the transmission of past cuts has picked up, it will take time to filter through to the broader economy. Meanwhile, the ongoing tariff situation is likely to have asymmetric sectoral effects, with sectors such as textiles and gems and jewellery facing higher risks. In this context, targeted policy support at the sectoral level appears more appropriate than broad-based macroeconomic easing.

Previous rate cuts by the RBI and policy reforms such as GST rate cuts could somewhat cushion the shocks from tariff disruptions, provided a trade deal with the US is reached soon. A tactical pause in the October meeting by the RBI would also preserve policy space should tariff disruptions prolong and downside risks to growth materialise at the macro level. Additionally, CPI is expected to edge closer to 4% in Jan-Mar and average around 4.5% in FY27. At the current repo rate, this would place the real policy rate in the 1–1.5% range. Hence, a rate cut in the upcoming meeting looks unlikely. That said, if growth risks intensify materially due to the prolongation of tariff-related disruptions, the RBI may consider cutting the rate in the December policy.

BARCLAYS

After a neutral pause in August, we see the RBI MPC cutting the policy repo rate by 25 bps in the upcoming meeting, acknowledging that this is a close call versus a dovish pause, and deferring the cut to December. Our base case for an October cut is premised on comfort over inflation, which allows further monetary easing. 

The recent tightening of financial conditions and the tariff overhang clouding the growth outlook in the 12-month ahead period are also reasons for a forward-looking central bank to cut rates. The tightening of financial conditions is also hindering transmission of policy easing to financial markets and bank lending rates. 

SOUMYA KANTI GHOSH, GROUP CHIEF ECONOMIC ADVISOR, STATE BANK OF INDIA

There is merit and rationale in going for a September rate cut. But this will require calibrated communication by the RBI as post June, the bar for rate cut is indeed higher. But there is no point in committing a 'Type 2' error again (no rate cut with neutral stance) by not cutting rates in September as inflation will continue to remain benign even in FY27 and without a GST cut, it is tracking below 2% in September and October. CPI FY27 numbers are now tracking around 4% or less, with GST rationalization, October CPI could be closer to 1.1%, the lowest since 2004. A rate cut in September is the best possible option for RBI, which also projects it as a forward-looking central bank

GAURA SEN GUPTA, CHIEF ECONOMIST, IDFC FIRST BANK

Given the heightened uncertainty on trade, we have taken a conservative estimate of FY26 real GDP growth at 6.6%. This implies Oct-Mar GDP growth of ~6.0% versus 7.6% growth in Apr-Sept. This faces downside risk if 50% bilateral tariff persists and/or trade tensions shift towards services exports. Hence, from real rates perspective as well as assessment on growth, there is space to cut policy rates. The need could arise from downside risks to growth from tariffs and possible spread of tensions to services exports. Against this backdrop, RBI is likely to stay on pause in October and cut in December if downside risks to growth materialise. By the December policy, there will be clarity on the impact of GST on consumption demand with the festival season complete and hopefully, some clarity on tariffs.

MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES

The consensus view of "no rate cut" in October seems driven more by the RBI's June and August policy guidance than by current macro realities. However, we believe there are enough reasons for the RBI to depart from its recent guidance, deliver further 25 bps of easing in October, and adopt an open-ended policy approach/guidance for more easing ahead. Notwithstanding the "done for now" RBI guidance and possibility of our rate cut call going wrong in the October policy, we re-emphasise what the June MPC meeting taught us was that macro resets should evidently need front-loaded policy action than a back-loaded one.  End

Compiled by Pratiksha

Filed by Avishek Dutta

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