RBI October Monetary Policy: Status quo or rate cut on the cards?

The Reserve Bank of India (RBI) is widely expected to maintain status quo on interest rates at its upcoming Monetary Policy Committee (MPC) meeting, though the possibility of a rate cut remains a close call. The outcome will be announced by RBI Governor Sanjay Malhotra on Wednesday, October 1, at 10 AM.

The RBI has underlined that monetary policy alone has limited scope to accelerate growth, with fiscal measures such as Goods and Services Tax (GST) rate cuts playing a more prominent role in boosting consumption.

The central bank is therefore expected to adopt a wait-and-watch stance, evaluating how GST-driven consumption trends evolve amid global and domestic risks. The rupee remains under pressure, while global uncertainties continue to weigh on the outlook.

At its previous MPC meeting in August 2025, the RBI left the repo rate unchanged at 5.50 percent, following a 50 basis point cut in June 2025. The central bank had maintained a neutral stance, noting that the space for further easing appeared limited at that stage.

No rate cuts likely in October?

Nuvama said the MPC is likely to keep rates unchanged in October while staying in a wait-and-watch mode as the impact of GST cuts unfolds. The brokerage noted that while tax cuts may lift consumption, weaker government spending and tariff-related drags could offset some of the gains.

"At its last policy, the RBI kept rates unchanged and maintained a neutral stance, noting limited room for further easing. We expect the MPC to hold rates steady at the upcoming review, remaining in a wait-and-watch mode as the effects of GST cuts begin to play out. While the tax cuts may support consumption, slower government spending amid lower tax collections and the drag from tariffs could offset this. With the Fed moving towards easing and India’s real rates still elevated, we expect the RBI to eventually start monetary easing, though the timing will be crucial. Overall, we argue the RBI is likely to commence measured easing later this year," Nuvama said.

Case for October Rate Cut

Emkay took a more contrarian view, suggesting that the October policy could see a 25 basis point rate cut despite the RBI’s earlier guidance. The brokerage said that the consensus of “no rate cut” is guided more by the RBI’s June and August commentary than by present macro conditions.

“The consensus view of ‘no rate cut’ in October seems driven more by the RBI’s June and August policy guidance than by the current macro realities. However, we believe there are enough reasons for the RBI to depart from its recent guidance, deliver a further 25bps easing in October, and adopt an open-ended policy approach/guidance for more easing ahead. Notwithstanding the ‘done for now’ RBI guidance and possibility of our rate-cut call misfiring in the October policy, we re-emphasize that what the June MPC meeting taught us was that macro resets evidently need front-loaded policy action than a back-loaded one,” Emkay said.

More Rate Cuts Ahead?

Brokerages remain divided on the near-term outcome, but there is consensus that more rate cuts could come later in the year. Nuvama reiterated that real rates remain restrictive and need to move lower to support demand revival.

“We expect the RBI to resume rate cuts down the line. In our view, a quick revival in demand is unlikely. The effect of GST cuts on demand may be offset by a likely slowdown in government spending (amid lower tax collections) and steep tariffs. In any case, we think real rates are still restrictive and need to move lower,” Nuvama added.

Emkay also assigned a 30 percent probability that the MPC may defer easing until December 2025 to gain greater clarity on domestic and external risks, the impact of GST cuts, and the pass-through of earlier reductions.

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