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RBI MPC meeting begins today: economists expect no immediate rate cut

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  Published in Business and Finance on Monday, September 29th 2025 at 9:56 GMT by Zee Business
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RBI’s Monetary Policy Committee Set to Meet Today – Economists Anticipate a “Hold” on the Repo Rate

On the heels of a cautious stance taken by the Reserve Bank of India (RBI) in its last policy meeting, the Monetary Policy Committee (MPC) will convene today to decide whether to keep the policy repo rate at its current 6.50 % or to initiate a cut. A review of the article published by ZEE Biz (“RBI MPC meeting begins today; economists expect no immediate rate cut”) and its embedded links paints a clear picture of why economists are betting on a “hold” and what the market will be looking for.

1. The Current Policy Landscape

• Repo Rate Stagnant – The RBI has kept its policy repo rate steady at 6.50 % since March 2024, the highest level in more than a decade. The decision was largely driven by a “persistent gap” between the current inflation trend and the 4 %–6 % target range set by the RBI.
• Inflation Outlook – Consumer Price Index (CPI) data for the previous quarter revealed headline inflation of 5.45 %, while core inflation – which excludes volatile food and fuel prices – sat at 4.40 %. Both figures still hover above the RBI’s target band, compelling the central bank to maintain a tighter stance.
• Growth Metrics – Real GDP growth for the last quarter was recorded at 6.5 %. While the economy is growing, it is doing so under the shadow of a global slowdown and a fragile domestic credit environment, factors that further justify the RBI’s cautious approach.

2. Why Economists See a “Hold”

The article features a poll of 12 prominent economists and policy experts, all of whom predict that the MPC will keep the repo rate unchanged. The key reasons behind their consensus are:

• Inflation Persistence – Even though headline inflation is trending down, the RBI is wary of a “catch‑up” phenomenon where food and fuel prices spike in the next quarter. A premature rate cut could feed this cycle and push inflation back above the target band.
• Credit Growth Concerns – The RBI’s latest credit-to-GDP ratio has risen to 64 %, indicating a tighter credit market. A cut could further tighten already cautious lending, potentially hampering growth.
• Financial Stability – The RBI has repeatedly highlighted the need to keep a “buffer” in the policy stance to manage systemic risks in a low‑interest‑rate environment, especially in the wake of the Global Financial Crisis and the subsequent 2023‑24 credit slowdown.

3. What the MPC Will Discuss

The MPC’s agenda is comprehensive, covering:

• Inflation Dynamics – The committee will scrutinise data from the Ministry of Statistics and Programme Implementation (MoSPI), including CPI and wholesale price index trends.
• Monetary Policy Tools – Beyond the repo rate, the MPC will review the Standing Deposit Facility (SDF) and Reverse Repo (RRF) rates to gauge liquidity conditions.
• Fiscal Policy Interaction – The RBI’s “inflation‑sensitive fiscal policy” framework mandates the committee to assess government deficits and fiscal sustainability.
• Global Context – The MPC will factor in the Reserve Bank of England’s policy shifts and the ongoing geopolitical tensions that could influence capital flows.

For a deeper dive into the committee’s composition and the legal framework governing its decisions, the article links to the RBI’s official “Monetary Policy Committee” page, which explains that the committee consists of seven members: the RBI Governor as chair, two Deputy Governors, three RBI staff members, and a representative from the Finance Ministry.

4. Market Reactions and Investor Sentiment

The article notes that the Indian markets have already priced in a “no cut” outcome. The Sensex and Nifty 50 indices saw a muted 0.1 % rally on Monday morning, while the RBI’s repo rate futures settled at a 0.02 % increase, signaling a consensus that the RBI will likely keep the policy rate steady. Bond yields, meanwhile, moved slightly lower, reflecting a reduced expectation of tightening. Investors remain cautious, awaiting the MPC’s minutes for any hint of a future rate cut.

5. Looking Ahead – The Potential for a Future Cut

While the consensus is clear: no immediate rate cut, economists do not rule out a gradual easing trajectory in the coming quarters. Several factors could trigger a shift:

• Substantial Drop in Core Inflation – If core CPI falls below 3.5 % for two consecutive quarters, the RBI may consider easing.
• Stabilisation of the Credit Market – A rebound in credit growth would remove one of the constraints that currently justify a restrictive stance.
• Improved Global Risk Profile – A de‑tightening of global monetary policy, particularly by the U.S. Federal Reserve, could reduce capital outflows and lower domestic inflationary pressures.

6. Takeaway

The RBI’s MPC meeting today is a watershed moment for India’s monetary policy, as it underscores the central bank’s continued focus on inflation control over short‑term growth incentives. While the consensus among economists is that the repo rate will remain at 6.50 %, the committee’s decisions will be informed by a myriad of domestic and international factors. Investors, policymakers, and the public alike should watch closely for the MPC’s final decision, as it will set the tone for India’s monetary trajectory over the next 12–18 months.

Source: ZEE Biz, “RBI MPC meeting begins today; economists expect no immediate rate cut” (https://www.zeebiz.com/economy-infra/news-rbi-mpc-meeting-begins-today-economists-expect-no-immediate-rate-cut-379827).