RBI's Monetary Policy Update: October 2025
Policy Pause Continued Amid Global Uncertainty and Improved Inflation Growth Dynamix
The RBI Monetary Policy Committee delivered a status quo policy as widely expected. The repo rate remains at 5.5% and the stance continues to be NEUTRAL, with the decision receiving unanimous support from all MPC members
The central bank emphasized that the impact of the earlier 100 bps rate cuts is still unfolding, and hence, further action will be contingent on the evolving macro landscape. The RBI appears in no rush to cut rates again, despite headline inflation easing considerably and growth holding up well. However, our assessment indicates that there may be one rate cut of 25bps in December Policy.
Key Takeaways:
# Repo rate unchanged at 5.5%, on expected lines
# Stance remains Neutral; decision was unanimous
# CPI inflation forecast for FY26 revised further lower to 2.6% (from 3.1%)
# FY26 GDP growth forecast increased to 6.8% from 6.5%, signaling confidence in domestic growth
# Liquidity surplus has stood at Rs2.1 lakh crore since the last policy
Key Rates:
* Repo Rate: 5.50% (Unchanged)
* Standing Deposit Facility Rate: 5.25% (Unchanged)
* Marginal Standing Facility (MSF): 5.75% (Unchanged)
GDP Forecasts:
* FY26: 6.8% (Revised from 6.5%)
* Q2FY26: 7.0% (Revised from 6.7%)
* Q3FY26: 6.4% (Revised from 6.6%)
* Q4FY26: 6.2% (Revised from 6.3%)
* Q1FY27: 6.4% (Revised from 6.6%)
CPI Inflation Forecasts:
* FY26: 2.6% (Revised from 3.1%)
* Q2FY26: 1.8% (Revised from 2.10%)
* Q3FY26: 1.8% (Revised from 3.10%)
* Q4FY26: 4.0% (Revised from 4.4%)
* Q1FY27: 4.5% (Revised from 3.10%)
Inflation Landscape Turns More Benign: One of the key highlights of the policy was the sharp downward revision in CPI inflation projections for FY26 — from 3.1% earlier to 2.6% now. Governor Malhotra attributed this to ; (a) Softer food inflation, (b) A favorable monsoon outlook and (c) Continued disinflation in core categories
However, he did caution that inflation may edge up to 4.5% in Q1FY27, suggesting that this benign phase may not persist indefinitely.
Growth Outlook Resilient Despite External Headwinds: RBI retained its real GDP growth estimate for FY26 at 6.8% from 6.5% earlier, reflecting continued optimism about domestic economic activity, bolstered by rural recovery, public capex, and robust services sector momentum.
The Governor also noted that external demand remains uncertain, especially with new global risks like the recent 50% U.S. tariff on Indian imports, which adds a layer of complexity for India’s trade-exposed sectors.
Our View:
The October policy outcome was broadly in line with expectations—a cautious, data-dependent pause with no negative surprises. With inflation trending lower and growth momentum improving, we see December 2025 as a live window for another 25 bps cut, provided global risks don’t escalate. The structural banking reforms + dovish policy bias create a constructive setup for risk assets once clarity emerges over the next 1–2 months
By: via AlliesFinServe #StockMarket #Bharat Telegram.me/AlliesFin
