The Reserve Bank of India's Monetary Policy Committee (MPC) will begin its three-day meeting in Mumbai today to set policy rates. Before making a decision, the committee members will meet to discuss and deliberate on repo rates, as well as to review current economic conditions.

Key Highlights

• RBI is expected to hold policy rates at 5.50%, with few economists predicting a surprise cut. 
• Subdued inflation and growth concerns weigh heavily, with possible “insurance” easing still on the radar.

The meeting is scheduled to last three days, following which the monetary policy outcome will be announced on Wednesday, October 1.

The meeting will focus on assessing the current state of the economy and determining whether changes to key policy rates are required to support growth while managing inflation. RBI Governor Sanjay Malhotra will announce the meeting's outcome on Wednesday at 10 a.m.

The announcement will clarify the committee's decision on repo rates and other relevant policy measures. Markets, businesses, and policymakers all keep a close eye on the outcome of monetary policy to see how it affects borrowing costs and overall economic activity.

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) unanimously decided to keep the repo rate at 5.5% at its last policy meeting in August.

According to a report by the State Bank of India (SBI), the Monetary Policy Committee (MPC) may announce a 25 basis point (bps) cut during this policy meeting because it is the best option at this time.

The report stated that there is both merit and rationale for a rate cut in September, as inflation remains under control and the outlook suggests further moderation.

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It stated, "Central banks' communication without cacophony is a policy tool unto itself in the midst of chaos. There's no point in making a Type 2 error (no rate cut with Neutral Stance) in September either. A 25 bps rate cut in September is the best option for the RBI."

The SBI report stated that since June, the bar for rate cuts has risen, and any such decision will necessitate calibrated communication by the central bank.

However, it emphasized that inflation is expected to remain low even in FY27. Without any GST cuts, inflation is already expected to fall below 2% in September and October. CPI numbers for FY27 are now expected to be around 4% or less. With GST rationalization, October's CPI could fall closer to 1.1%, the lowest since 2004.