Mumbai, Sept 29 — The Reserve Bank of India (RBI) is widely expected to maintain the benchmark repo rate at 6.5% during its upcoming monetary policy meeting on October 1, as inflation shows signs of easing and global financial conditions remain volatile. This would mark the fifth consecutive meeting where the central bank has opted for a status quo on rates, following a cumulative 250 basis points hike between May 2022 and February 2023.
Economists and market analysts anticipate that the Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, will adopt a cautious stance, balancing domestic growth priorities with external risks. Retail inflation eased to 6.83% in August from 7.44% in July, driven by a decline in vegetable prices, though it remains above the RBI’s upper tolerance band of 6%.
Core inflation, excluding food and fuel, has also softened, providing room for the central bank to maintain its current policy rate. However, concerns persist over food price volatility, crude oil fluctuations, and global monetary tightening, particularly by the U.S. Federal Reserve.
The RBI is expected to retain its “withdrawal of accommodation” stance, signaling continued vigilance against inflationary pressures. Liquidity management and transmission of previous rate hikes will likely remain key focus areas, with the central bank possibly deploying tools such as variable rate reverse repos (VRRRs) to absorb excess liquidity from the banking system.
On the growth front, India’s GDP expanded by 7.8% in the April–June quarter, supported by strong domestic demand and robust services sector performance. The RBI may revise its inflation forecast slightly downward while keeping its growth projection unchanged at 6.5% for FY26.
Bond markets have largely priced in a rate pause, with the 10-year government bond yield hovering around 7.2%. Equity markets are expected to react positively to a dovish tone, while the rupee remains under pressure due to rising U.S. yields and geopolitical tensions.
The October 1 policy decision will be closely watched for cues on the RBI’s medium-term outlook, especially as India heads into the festive season and prepares for the Union Budget 2026.
