Opinion is divided among economists on the RBI’s action at its upcoming monetary policy committee meeting scheduled between September 29 and October 1.

While some expect the central bank to maintain the status quo with a dovish stance, other analysts believe a further 25 basis points cut in the repo rate cannot be ruled out, on top of the 100 basis points reduction already delivered in the current easing cycle.

At its August review, the RBI kept the repo rate unchanged at 5.5 per cent and retained a neutral stance. A Reuters poll suggests the RBI will likely stay put again, as it weighs the impact of front-loaded easing against stronger-than-expected growth and inflation within the 2–6 per cent target band.

Wait and watch

Despite global headwinds, the RBI’s September bulletin reflected optimism on India’s economic prospects. It noted that the S&P sovereign rating upgrade underscored strong macro fundamentals, while Q1 FY26 GDP and high-frequency indicators for August pointed to robust manufacturing and services activity.

“The growth outlook for H2 is one of optimism,” the bulletin said, highlighting GST reforms, higher kharif sowing, and robust transmission of earlier rate cuts as supportive factors. Together with income tax relief and job-creating measures, the central bank said these conditions could set the stage for stronger consumption and investment momentum. CPI inflation has edged up but remains within the target range. The RBI said core inflation, excluding food and fuel, was driven mainly by higher gold prices.

Analysts believe this gives the central bank breathing room. “While tariffs are a clear headwind, there are domestic tailwinds also building up,” said Sajjid Chinoy, chief India economist at JP Morgan on CNBC TV18. As a result, the RBI may wait until December for fresh action, by which time US-India trade talks could likely have more clarity.

“GST rationalisation is unambiguously set to moderate inflation. However, this is the outcome of a policy change and will likely be accompanied by stronger demand. This suggests a status quo for the repo rate in the October 2025 policy review, in what appears to be a close call,” said Aditi Nayar, chief economist, Icra

Murthy Nagarajan, head of fixed income at Tata AMC, said the RBI’s FY26 growth guidance is expected to stay at 6.5 per cent, while the inflation forecast could be trimmed to 2.8 per cent from 3.1 per cent estimated in August. “We do not expect a rate cut in this policy. Given forward one-year CPI inflation is projected closer to 5 per cent, we believe the central bank will adopt a dovish stance,” he said.

Case for further cut

SBI Research, however, said GST rationalisation could push inflation lower, creating space for a 25 basis points cut. “Inflation may decline by another 65–75 basis points due to the GST rate rationalisation. In 2019, similar rationalisation led to a 35 basis points fall in just a couple of months,” it noted. Barclays also expects the RBI to resume cuts after the August pause.

Dharmakirti Joshi, chief economist, Crisil, said: “We expect that a repo cut could come as soon as October due to lower-than-expected inflation. Core inflation, which indicates excess demand pressure, remains low despite the impact of rising gold prices.” Bond yields remaining firm is a concern, analysts said, noting that despite earlier easing and liquidity infusions, borrowing costs for central and state governments are still high.

Globally, central banks are tilting dovish. In August, New Zealand, Australia and England cut rates, while the US Fed followed in September. The ECB and China have held their rates steady.