RBI MPC Meeting Outcome on Oct 1: Another Rate Cut on Cards? Most Economists Expect a Pause But Surprise Possible

As the Reserve Bank of India commences its three-day Monetary Policy Committee meeting today, the central bank is largely expected to hold its repo rate at 5.5%. However, some economists do predict a possible cut amid the impact of U.S. trade tariffs.

Following the meeting, the decision will be announced by RBI Governor Sanjay Malhotra on Wednesday morning.

According to a Reuters poll, nearly three-quarters of economists expected a pause but major banks including Citi, Barclays, Capital Economics and SBI have flagged the possibility of a cut stating reasons like downside risks to growth and a benign inflation outlook.

Since the beginning of this year, the RBI has cut rates by 100 basis points but private investment remains weak and financial conditions tightened after the August policy meeting. This is when the central bank held rates and retained a neutral stance.

Citi economists wrote that the October meeting is "live" again and also noted that the RBI could opt for an "insurance" rate cut to cushion against external shocks or deliver a dovish pause with a clear signal to act soon.

"We have a marginal bias that the RBI would opt for the insurance rate cut view,” the economists said as quoted by Reuters.

In the June quarter, India's economy grew a stronger-than-expected 7.8% but some economists said the figure may overstate the actual strength of the economy because it was calculated after adjusting for inflation.

The Centre has stepped up fiscal support through income tax relief and goods and services tax rate rationalisation, but tariffs and rupee weakness have clouded the outlook.

India’s trade tensions with the U.S., including 50% tariffs on Indian exports and higher visa fees have raised concerns regarding broader punitive measures on services trade.

However, economists point out that RBI may prefer to act early rather than wait for the full impact to play out.

Speaking to Reuters, Capital Economics said, "The hit to GDP growth from punitive U.S. tariffs, along with a benign inflation outlook, sets the stage for the RBI to resume its easing cycle.”

Inflation has stayed below the central bank’s 4% target and thereby economists expect further disinflation from the GST rate cuts. As per majority of economists, the outlook for full-year growth is expected to be revised upwards and inflation to be revised downwards.

Writing a note, SBI's Chief Economist, Soumya Kanti Ghosh said that a rate cut would position the RBI as a forward-looking central bank. However, he also warned the need for calibrated communication given the higher bar for easing post-June.

He further said that inflation would remain benign even in FY2027.

Despite this, a majority of economists suggested the RBI may prefer to wait until December, especially if trade negotiations show progress. Others said that targeted relief measures could be more effective than broad-based easing.