While MPC poll sees a pause in October, some street voices hoping for an accommodative stance

Some economists believe that even though the RBI has room for further easing, it may prefer a wait-and-watch approach in the October policy.

The upcoming monetary policy meeting may not see a rate cut, as reflected in the Moneycontrol MPC poll of economists, but the lower CPI print does provide enough headroom for further easing.

Market Eyes Dovish Tilt

Some market veterans believe that more than the rate cut, investors may find support from a change in stance by the central bank, signalling a dovish tilt by the RBI.

A Balasubramaniam, MD & CEO of ABSL AMC said, "With nominal GDP growth subdued, it’s important to lift overall growth back into double digits, aided by the recent GST rate cut. The festive season is set to bring strong demand for goods. Given sustained low inflation, the RBI may shift to an accommodative stance, creating room for a rate cut if required."

Some experts point to global uncertainties and recent policy measures as reasons for the RBI to potentially pause.

“Going by global uncertainties, RBI may take a pause and keep the ammunition for the next monetary policy, since government has already taken steps to boost consumption via GST 2.0”, says independent market analyst Ambareesh Baliga.

Case for 25 bps Cut?

Barclays expects the RBI MPC to cut the repo rate by 25 bps after a pause in August, while acknowledging that this is a close call versus expectations of a dovish pause, and a cut could possibly be deferred to December.

“Our base case for an October cut is premised on comfort over inflation, which allows further monetary easing. The recent tightening of financial conditions and the tariff overhang clouding the growth outlook in the 12-month ahead period are also reasons for a forward-looking central bank to cut rates,” a recent Barclays note said.

Barclays also expects the RBI to revise its FY25-26 CPI inflation forecast lower. While the case for a statistical upward revision of the growth estimate is compelling, growth is still expected to be retained at 6.5% with possible upside risks.

Read More: A well priced-in ‘pause’, a less priced-in ‘neutrality’

A SBI Research note said that a 25 bps rate cut is the “best possible option for the RBI.” The view is based on the belief that the bottom of CPI inflation may not have been reached yet, and could further decline by 65-75 bps due to significant GST rationalisation.

Read More: SBI report warns of global headwinds, pegs India’s FY26 GDP growth at 6.3%

Nomura too has noted a shift in market sentiment, with many participants now expecting the RBI to cut rates further in the coming months. “Our economists continue to forecast two more reductions, one each in October and December,” said Nomura.

Wait-and-Watch Approach

Some economists believe that even though the RBI has room for further easing, it may prefer a wait-and-watch approach in the October policy.

In an interview with CNBC-TV18, Sajjid Chinoy, Managing Director and Chief India Economist of JPMorgan, who is also a part-time member of the EAC-PM ruled out a rate cut in October. He said, "While Trump’s tariffs are a clear headwind, domestic tailwinds too are building up – in terms of higher consumption, monetary easing, direct and indirect tax cuts, lower inflation, a strong GDP print with good monsoon. So, I expect the RBI to take a wait and watch approach, similar to the US Federal Reserve". He also added that low inflation provides headroom for a rate cut, but the growth trajectory needs to be monitored.

Room for 50 Bps Cut?

A pro-growth 50 bps may also be on the cards in this easing cycle, according to some. "With inflation in the RBI’s comfort zone, the MPC has room to cut rates", said Kranthi Bathini of WealthMills Securities. He sees a 25 bps cut but doesn’t rule out a pro-growth 50 bps move over the rest of the year. Any cut, he adds, would lift domestic consumption alongside the GST rationalisation push.

This year, the MPC has reduced the repo rate by 100 bps to support growth, with a 25 bps cut in February and April, followed by a 50 bps cut in June.

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