RBI Monetary Policy Committee Meeting Begins, Will There Be a Change in the Repo Rate?

In Brief

• Meeting of the Reserve Bank of India's Monetary Policy Committee in progress

• What is the experts' prediction regarding the repo rate?

• What will be the impact on inflation?

The meeting of the Reserve Bank of India's Monetary Policy Committee is underway in Mumbai. In this meeting, India's economic situation will be studied, and discussions will be held on the repo rate and other policies. The committee consists of a total of 6 members. This committee will study the economic situation and make a decision regarding the repo rate. On October 1, the decision regarding the repo rate will be announced by the Governor of the Reserve Bank of India, Sanjay Malhotra. If the RBI reduces the repo rate, banks may also decide to reduce the interest rates on home loans and vehicle loans.

This meeting will discuss inflation, economic growth, and market conditions. A review of the state of the economy in the last financial year will be conducted. The RBI's monetary policy meeting was held in August. In that meeting, it was decided to keep the repo rate steady at 5.5 percent. In June, there was a cut of 50 basis points, and prior to that, in February and April, there was a cut of 25-25 basis points.

What is the expert's estimate regarding the repo rate?

According to ICRA's Chief Economist Aditi Nayar, due to changes in GST, inflation may decrease between October and November. However, there is a possibility of inflation rising thereafter. According to Nayar, due to GST reforms, demand will increase, which makes it more likely that the repo rate will remain steady in the October meeting.

IDFC FIRST Bank's Chief Economist Gaurav Sen Gupta stated that there is strength in the economic situation of the first quarter. Considering this, the impact of tax and GST cuts by the RBI will be taken into account for future decisions. Decisions may be made after the festive season and considering consumer demand and the impact of American tariffs. If a trade agreement between India and the USA can be reached, tariffs will be reduced by 25 percent, which will also be considered when making decisions regarding the repo rate.

According to experts, the global economy will remain slow due to America's tariffs, which may lead to a decrease in demand. A decrease in demand could impact India's exports and employment. Some relief may come from GST reforms. However, the government will need to take steps on economic and monetary policy levels to improve this situation. The government will also need to focus on issues other than economic matters.

What will be the impact on inflation?

In the previous monetary policy meeting of the RBI, there was no change in the repo rate. It is likely that the RBI will cut the repo rate again by the end of this year, which is expected to make loans cheaper and increase the flow of money in the market.

According to experts, the inflation rate may decrease in the financial year 2025-26. GST reforms have been introduced by the government, which is expected to have a positive impact on inflation and reduce the prices of goods. In August, the retail inflation rate was 2.07 percent. In July, this rate was 1.61 percent. According to Indian experts, the GDP growth rate is expected to remain at 6.5 percent in the financial year. Meanwhile, experts believe that if a positive impact is seen from the ongoing tariff discussions with the United States, there will be no need for any changes in the economic growth rate.