RBI's MPC Starts Deliberations on Key Interest Rate; Decision on Wednesday

The Reserve Bank's Monetary Policy Committee began its three-day deliberations amid expectations of status quo on the key interest rate, but some experts think that the central bank may settle for a 25 bps cut.

The decision of the RBI Governor Sanjay Malhotra-headed six-member rate-setting panel will be announced on Wednesday. The meeting is taking place against the backdrop of ongoing geopolitical tensions and the US imposing 50% tariffs on Indian shipments.

The RBI reduced the key short-term lending rate (repo) by 100 basis points in three tranches, beginning in February, amid declining consumer price index (CPI) based inflation.

However, the central bank opted for a status quo in the August bi-monthly monetary policy, taking a wait-and-watch approach to assess the impact of US tariffs and other geopolitical developments on the domestic economy.

A Goldman Sachs report expects the RBI Monetary Policy Committee (MPC) to hold the policy repo rate at 5.50% at the October meeting, and maintain the "neutral" stance, but deliver a dovish guidance while it assesses growth conditions and awaits fuller transmission of the 100 bps easing delivered so far this cycle before considering further action.

"In our baseline, we expect another 25 bps cut in December, taking the repo rate to 5.25%, supported by a benign inflation outlook, our US economists’ view of a more dovish Fed path relative to market pricing, and our FX strategy team's expectation 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," it said.

A Bajaj Broking Research report noted that in the previous MPC meeting held in August 2025, the RBI retained the repo rate at 5.5%, following a 50 basis point reduction in June 2025.

"Street largely expect the RBI to maintain the repo rate at 5.50% (unchanged), citing subdued inflation and potential risks to growth," it said.

Meanwhile, Praveen Sharma, CEO of Housing.com, said the festive season has traditionally been the most vibrant phase for homebuying in India.

"A rate cut by the RBI at this juncture could add further fuel to the momentum. If banks transmit the benefit fully, it would not only lift buyer sentiment and affordability, but also nudge fence-sitters to take that long-awaited decision," he added.

Shikhar Aggarwal, Chairman, BLS E-Services, expects the RBI to keep its key interest rate unchanged next week.

"Given global uncertainties and the recent positive impetus from GST 2.0, the central bank may adopt a wait-and-watch approach, holding any policy changes for a later date. The strong domestic demand, which drove Q1 growth to a five-quarter high, offers the necessary resilience for such a pause," Aggarwal added.

On expectations from the MPC, Ashok Kapur, Chairman, Krishna Group and Krisumi Corporation, said that while the apex bank maintained the status quo in its previous policy review, a further 25 bp reduction in the policy rate would be the icing on the cake, as inflation continues to remain within the RBI’s manageable limits.

"Such a move could significantly spur consumption across the economy, particularly giving a further boost to the housing sector. We remain optimistic of sustained demand for homes across segments, backed by supportive policy interventions and the continued momentum in the housing sector," Kapur said.

Rohit Arora, CEO and Co-Founder, Biz2X & Biz2Credit, also opined that a 25-basis-point cut would be a timely and practical step to support credit growth for MSMEs and strengthen the lending ecosystem across banks, NBFCs and fintechs.

"Inflation has dropped sharply, with SBI research projecting CPI near 1.1% in October, and the new GST rules implemented on September 22 already reducing tax rates on many goods and services. Together, these factors give the RBI room to ease policy without risking price stability," Arora said.