On 1 October 2025, the Reserve Bank of India’s Monetary Policy Committee (MPC) decided, as per market predictions, not to change the repo rate of 5.50%. The six-member panel was united in the vote to keep the present rate, at the same time, it renewed the commitment to a neutral policy stance. After a series of graded cuts earlier during the year, this is the second time the RBI is hitting the brakes in a row.
Growth and Inflation Outlook
To reflect the strengthening economy, RBI has altered its forecasts. The central bank has slightly upgraded the projection of GDP growth for FY26 besides domestic demand being very strong, the rising investments, and revival of manufacturing and services. At the same time, the bank has lowered the inflation forecast on the assumption that the price of food is falling and supply-side improvements are easing inflationary pressures.
As pointed out by the RBI Governor Shaktikanta Das, consumer inflation has also relaxed, but the risks from geopolitics and volatility in global commodities are still lurking. The neutral stance gives the central bank the option of a prompt reaction in the case of inflation surprises, either at the upside or at the downside.
Why the Pause Matters
By not changing the repo rate, the RBI is taking a middle path between aiding the growth and maintaining the inflation within the target limits set at 4% ± 2%. At this point, a further rate cut could have gone against the purpose of RBI, making it easy for demand-driven inflation to take root, especially given the situation of crude oil prices. Conversely, a rise in the rate would have had the effect of limiting the flow of credit to businesses and households.
For borrowers, a break in the cycle means that the home loan EMIs and corporate borrowing costs are going to remain unchanged at least for some time. Fixed deposit rates for savers are also expected to hover around the current levels which translates into the certainty of returns.
Policy Measures Beyond Rates
In addition to rate decisions, the RBI made announcements regarding the policy to ease credit delivery and liquidity management. Several steps taken to promote digital lending and ease the regulatory burden on small banks were the focus. Structural changes in the financial system will lead to greater financial inclusion, the analysts say, ensuring that the money goes to the most productive sectors.
What Lies Ahead
The Reserve Bank of India may possibly lower the interest rate in winter 2025 if the general price level continues to decline, according to economists. Several factors will determine this including the consumer price index releases, world interest rate movements and fiscal policies in the country.
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