RBI MPC holds repo rate: Is one more cut coming in FY26? What experts hint?

RBI Monetary Policy: The Reserve Bank of India (RBI) kept the repo rate unchanged at 5.5 per cent for the second consecutive meeting, maintaining a neutral policy stance. After cutting rates by 50 basis points in June, the central bank opted to pause in both the August and October policy reviews. Alongside the decision, the RBI revised India’s FY26 GDP growth forecast upward to 6.8 per cent from 6.5 per cent, while projecting inflation at 2.6 per cent, down from 3.1 per cent.

A Dovish Pause, Not a Full Stop

Experts interpret the hold as a cautious but deliberate move, signaling the RBI is keeping its options open for future easing. Pallav Bagaria, Director at Sapient Finserv, said, “Sometimes being defensive is the most aggressive call. With so much happening globally, it’s sensible that the RBI has chosen to wait and watch rather than rush into action. By staying neutral, the RBI is sending a message of calm stability rather than reacting to short-term noise.”

Churchil Bhatt of Kotak Mahindra Life Insurance described the MPC’s decision as a “dovish pause,” noting, “The MPC today acknowledged fast-changing growth-inflation dynamics. While full-year GDP has been revised up by 30 bps, the forward-looking projections for Q3 and beyond are expected to be slightly lower than projected earlier. This has opened up some space for monetary easing.”

Indicators Point to One More Cut

Current market expectations suggest the RBI may deliver one more rate cut before the end of FY26. Naveen Kulkarni, CIO at Axis Securities PMS, explained, “The RBI’s decision to keep the repo rate unchanged was in line with our expectations. The recent GST rate rationalisation comes at an opportune time and is expected to support consumption demand during the festive season. However, one should remain watchful of the impact of external headwinds to growth from the US tariffs, which could partially offset the positive impact of the GST cuts. The pause in the current meeting leaves room for the RBI to opt for a 25bps rate cut in the forthcoming meetings, with growth buoyancy continuing and expectations of softening inflationary pressures.”

Echoing similar sentiment, Bhatt also noted "Market will keenly track incoming economic data to evaluate future trajectory of policy rates. We assign high probability to one more rate cut in this easing cycle going forward.”

Market Implications

While a single additional rate cut may be on the horizon, experts agree that an extended easing cycle is unlikely. Bond yields and currency markets are expected to react cautiously, and investors will closely monitor inflation trends and global developments before pricing in further easing.

In summary, the RBI’s latest decision does not rule out future cuts, but any move will likely be measured and data-dependent, with at most one more reduction anticipated in FY26.

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