RBI MPC Meeting Begins, 0.25% Repo Rate Cut Likely

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting began today, September 29, and will conclude on October 1. Key decisions, including the repo rate announcement, are expected on the final day. A recent report by the State Bank of India (SBI) suggests a possible 0.25% cut in the repo rate. If implemented, this cut could lower loan interest rates, offering relief to individuals and businesses. Cheaper credit may boost demand, support businesses, and positively impact economic growth. The SBI report highlights that inflation is under control and likely to fall further, creating a favorable environment for a rate cut.

The report warns that not cutting rates now could be a “Type 2 error” — missing the right action at the right time. A similar situation occurred in the past when RBI held rates despite favorable economic conditions. Since June, the RBI has maintained a high bar for rate cuts. Effective communication from the central bank during this meeting will be key. According to SBI, inflation could fall below 2% in September and October and might drop to 1.1% if GST rates are adjusted — the lowest since 2004.

So far this year, the RBI has cut the repo rate three times — by 0.25% in February, 0.25% in April, and 0.50% in June — totaling a 1% reduction. The current repo rate stands at 5.5%.

The MPC, which includes six members (three from RBI and three appointed by the government), meets every two months. This is the fourth meeting for FY 2025-26. The last meeting was held from August 4 to 6.