RBI MPC Meet 2025: Rate Cut Uncertainty Amid Growth Concerns

RBI MPC Set to Meet Amid Split Views on Rate Action

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is scheduled to meet from September 29 to October 1, 2025, amid growing debate over the possibility of a rate cut. Economists are divided, with some advocating for a reduction to boost growth, while others recommend a pause to assess macroeconomic conditions.

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SBI Research noted that a modest 25 basis points cut could be justified, given that CPI inflation for FY27 is projected at 4% or lower. The report added that with GST 2.0 rationalisation, the October CPI could drop to 1.1%, the lowest level since 2004. A timely reduction, according to SBI, would reinforce the RBI’s image as a forward-looking central bank, especially as global yields harden.

Arguments For and Against a Rate Cut

Supporters of an immediate rate cut argue that delaying action may increase future costs, particularly with inflation at 2.05% and likely to decline further due to GST rationalisation. They caution that postponement could miss an opportunity to stimulate growth.

Conversely, IDFC First Bank suggests the RBI may choose to maintain rates for now. The report highlights that while there is room to reduce rates from a real rates perspective, the decision hinges on growth risks. The GST cut could provide a 0.6% point boost to GDP, but escalating U.S. trade tensions could offset nearly 1% point. Analysts expect the central bank to wait for more clarity post-festive season, with a possible cut in December if downside risks persist.

Bankers interviewed by Moneycontrol on September 16 largely ruled out a rate reduction in this policy review, although they anticipate one more cut in the current fiscal year. The expected pause would be the second consecutive decision following the repo rate reduction of 100 basis points since February and the pause in August.

A Balancing Act Between Growth and Credibility

The upcoming RBI MPC meeting presents the RBI with a delicate balancing act: supporting economic growth while maintaining policy credibility. With inflation trending lower and global uncertainties rising, market participants will closely monitor the committee’s decision on interest rates. Analysts emphasise that the RBI’s choice will send key signals about its approach to growth and inflation management in the months ahead.