October MPC meet begins today: Repo rate, inflation outlook, and more

After slashing repo rates for three consecutive months since February, the MPC kept the rate unchanged at 5.5 per cent in August

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The Reserve Bank of India's (RBIs) rate-setting body, the Monetary Policy Committee (MPC), is scheduled to begin its bi-monthly meeting today, September 29. After slashing repo rates for three consecutive months since February, the MPC kept it unchanged at 5.5 per cent in August.

 

The MPC meeting that starts today will last two days, with the rate decision to be announced on Wednesday, October 1.

 

Let's take a look at what is MPC, what are the expectations from the October MPC meeting and what has changed since the last policy meeting.

What is the Monetary Policy Committee?

The MPC is a rate-setting body formally established by the RBI in 2016 under the RBI Act, 1934. It was created to ensure greater transparency and collective decision-making in India’s monetary policy. The first MPC meeting was held in October 2016.

What is the RBI MPC's role?

It is tasked with deciding the repo rate, which is the rate at which the RBI lends to commercial banks. Adjustments to the repo rate help the central bank control inflation and growth. 

 

The committee’s main objective is to:

• Maintain annual inflation at 4 per cent ± 2 per cent
• Support economic growth

October MPC to have a new member

The RBI appointed a new member, Indranil Bhattacharyya, executive director in charge of monetary policy, to the committee. He will be replacing the outgoing member Rajiv Ranjan.

 

The committee consists of six members. While three members of the committee are RBI officials, the remaining three are appointed by the government. Sanjay Malhotra, governor of RBI, serves as the ex-officio chairperson of the committee.

 

Other RBI members on the committee:

• Poonam Gupta, deputy governor in charge of monetary policy
• Saugata Bhattacharya, economist
• Ram Singh, director, Delhi School of Economics
• Nagesh Kumar, director & CEO, Institute for Studies in Industrial Development (ISID)

August 2025 RBI MPC highlights

In the last MPC meeting held between August 4–6, the RBI monetary policy committee announced the following:

 

Repo rate: The repo rate was kept unchanged at 5.5 per cent in August, after three consecutive cuts since February. Here's how the rates have changed so far this year:

• February: 25 bps cut
• April: 25 bps cut
• June: 50 bps cut
• August: No change

Inflation: In August, the MPC revised its Consumer Price Index (CPI)-based inflation projections, sharply decreasing estimates for the financial year 2025-26 (FY26), mainly due to softer food prices, a favourable base effect, and easing global commodity costs. 

 

The quarterly inflation forecast:

• Q2 FY26: 2.1 per cent
• Q3 FY26: 3.1 per cent
• Q4 FY26: Maintained at 4.4 per cent
• Q1 FY27: 4.9 per cent
• FY26: 3.1 per cent

Growth: The MPC kept its real gross domestic product (GDP) growth forecast for FY26 unchanged at 6.5 per cent, supported by resilient domestic demand, government capital spending, and improving rural consumption. 

 

The quarterly GDP forecast:

• Q1 FY26: 6.5 per cent
• Q2 FY26: 6.7 per cent
• Q3 FY26: 6.6 per cent
• Q4 FY26: 6.3 per cent
• FY26: 6.5 per cent

Stance: The committee also maintained its policy stance at ‘neutral’, signalling that future moves will depend on inflation and growth dynamics.

What has happened since last policy meet?

A lot has changed since the August MPC meeting. While US tariffs continue to remain in effect, the GDP surpassed expectations in the June quarter at 7.8 per cent. Meanwhile, the inflation inched up to 2.07 per cent in August from 1.61 per cent in July. 

 

Additionally, the US Federal Reserve also cut its benchmark interest rate for the first time since December 2024, keeping the main lending rate at 4-4.25 per cent. The US Fed also signalled that more cuts were likely this year.

 

Moreover, the government introduced historic goods and services tax (GST) reforms that are aimed at boosting consumer sentiment. Analysts expect that this rationalisation will moderate CPI inflation.

What to expect from October MPC meet?

According to a Business Standard poll of 10 economists, the committee is expected to maintain the status quo at its October meeting. Some respondents, including the State Bank of India, expect the panel to cut the policy rate by another 25 basis points (bps) in the upcoming meeting. One basis point is a hundredth of a percentage point.

 

A majority of economists see the terminal rate for the current rate cut cycle between 5 per cent and 5.25 per cent, with some expecting further cuts in December.

 

However, most of the analysts expect the RBI to revise its inflation forecast for FY26 downward, given the disinflationary impact of GST rationalisation.