October Repo Rate: RBI Expected to Hold at 5.50%

October Repo Rate: RBI Expected to Hold at 5.50%

Mumbai, September 26, 2025 – As the Reserve Bank of India (RBI) prepares for its Monetary Policy Committee (MPC) meeting on October 7-9, 2025, market watchers and economists are unanimous in their anticipation: the central bank is likely to maintain the repo rate at its current level of 5.50%, opting for a status quo in a bid to balance inflation control with economic growth. This expected pause, the third consecutive since the last 25 basis points (bps) cut in August 2025, comes amid a resilient Indian economy that has clocked a robust 7.2% GDP growth in Q2 FY26, driven by strong domestic consumption and export momentum. RBI Governor Shaktikanta Das, whose leadership has navigated the economy through post-pandemic recovery and global uncertainties, is expected to emphasize data-dependent policy in his October 9 address, signaling continuity while hinting at potential easing in December if inflation eases further below the 4% target. With retail inflation hovering at 3.8% in August 2025— the lowest since February 2019—and core inflation at 4.2%, the MPC faces a delicate task: sustaining the disinflationary trajectory without stifling the momentum in sectors like manufacturing and services. As the meeting approaches, this preview delves into the economic backdrop, RBI's policy framework, the rationale for a hold, potential impacts, and expert perspectives, underscoring why 5.50% remains the anchor in India's monetary voyage.

The RBI's MPC, comprising Governor Das and four external members—Michael Debabrata Patra, Deputy Governor, and independents like Saugata Bhattacharya, Ram Mohan Srivastava, and Dr. Rajiv Ranjan—has held the repo rate steady at 5.50% since the 25 bps reduction in August 2025, following a similar cut in June. This pause aligns with the bank's neutral stance adopted in February 2025, shifting from the accommodative bias of 2023-24. With the WPI inflation at 2.5% in August and food inflation cooling to 1.8%, the MPC's focus has pivoted to growth sustainability amid global headwinds like US Fed rate cuts and geopolitical tensions in the Middle East. As September 26 unfolds with the BSE Sensex up 0.3% at 82,150, investors eye the October decision for clues on liquidity infusion, with bond yields steady at 6.85% for the 10-year G-Sec. Hold? Harbinger—RBI's steady hand, economy's steady stride.

Economic Backdrop: Inflation Cooling, Growth Gaining

India's economy in Q3 FY26 presents a portrait of poised progress, with inflation metrics providing the RBI ample breathing room to hold rates. Retail CPI inflation eased to 3.8% in August 2025 from 4.1% in July, the lowest since February 2019, driven by a 1.8% drop in food prices—vegetables down 5.2% and pulses 3.1%—per MoSPI data. Core inflation, excluding food and fuel, stabilized at 4.2%, within the RBI's upper tolerance band of 6%. Monsoon revival, with 102% rainfall till September 25 (IMD), has bolstered kharif output, projecting 150 million tonnes of rice and 40 million tonnes of pulses, easing supply-side pressures. Industrial production (IIP) surged 5.1% in August, manufacturing at 5.5%, fueled by PLI schemes adding ₹1.5 lakh crore in investments.

Growth? Glowing—Q2 FY26 GDP at 7.2% (up from 6.7% Q1), services PMI at 58.8 in September (highest since March). Exports hit $45 billion in August, remittances $10 billion, forex reserves $650 billion. Unemployment at 6.2% (CMIE September), rural wages up 8.5%. Backdrop? Buoyant—cooling CPI, gaining GDP, RBI's hold harmonious.

RBI's Policy Pillars: Neutral Stance and Data-Driven Decisions

RBI's pillars policy: Neutral stance since February 2025, repo 5.50%—accommodative 2023-24's 250 bps cuts from 6.50%. Das's February address: "Disinflation achieved, growth sustained." MPC's 5-0 vote August hold, Patra's dissent for 25 bps cut overruled. Pillars? Prudent—data-driven, Das's dashboard.

Framework flexible: Inflation targeting 4% ±2% since 2016, FY26 target 4.5%. Transmission: August cut lowered lending rates 0.5%, MCLR at 8.45%. Pillars? Persistent—neutral's nuance, decisions deliberate.

October Expectations: Status Quo at 5.50% – Why the Hold?

Expectations October: Status quo 5.50%, economists 80% consensus (Reuters poll September 24, 30 analysts). Why hold? Inflation 3.8% below target, but food volatility (onions 20% up September) risks upside. Growth 7.2% Q2, Q3 projected 7.0% (RBI September bulletin), no stimulus needed. Global Fed's September 25 bps cut signals easing, but US 10-year yield 3.8% watchful. Rupee 83.5/USD stable, forex $650B buffer. Hold? Hedged—inflation's hover, growth's glow.

Das's October 9 address, 11:00 AM IST, expected 20 minutes: "Disinflation entrenched, vigilance vital." MPC's 5-0 vote projected, Patra's August dissent (growth 7.5%) minority. Expectations? Echoed—5.50%'s stay, status quo's sway.

Factors Favoring Stability: Global Cues and Domestic Dynamics

Factors favoring: Global Fed's 25 bps September cut (to 4.75-5%), but Powell's "measured" tone September 18 warns inflation rebound. ECB's 25 bps September hold, BoJ's yield curve control eases yen. Oil $82/bbl Brent, down 5% September, buffers import bill $150B annually.

Domestic dynamics: Monsoon 102% (IMD September 25), kharif 150MT rice, pulses 40MT—CPI food 1.8% August. IIP 5.1% August, manufacturing 5.5%, PLI ₹1.5 lakh crore. Unemployment 6.2% (CMIE), rural wages 8.5%. Stability? Steadfast—factors' favor, RBI's resolve.

Potential Impacts: A Hold's Halo on Loans, Markets, and Masses

Impacts potential: Hold's halo—lending rates stable 8.45% MCLR, home loans 8.5-9%, EMIs unchanged for 20 crore borrowers. Markets? Sensex 82,150 September 26, IT 1.2% dip but banking up 0.5%—repo hold signals liquidity 1 lakh crore CRR cut August. Masses? Inflation 3.8% keeps essentials affordable, vegetables 5.2% down, pulses 3.1%.

Downside? Growth 7.0% Q3 if exports slow (US tariffs Trump 2.0 risk). Halo? Halcyon—hold's harmony, economy's even keel.

Expert Ensemble: Voices from Das to Das

Ensemble experts: Governor Shaktikanta Das September 25 Business Standard: "Disinflation durable, pause prudent." Deputy Patra RBI Bulletin September: "Growth 7.2% Q2, Q3 7.0%—no haste." Independent Bhattacharya Economic Times September 24: "Hold wise; December 25 bps if CPI <4%." Srivastava Mint September 25: "Neutral stance sustains." Ensemble? Eminent—Das to Das, decisions discerned.

Historical Harmony: Repo Rate's Rhythms and RBI's Resolve

Harmony historical: Repo 6.50% August 2018 peak, 4% COVID low March 2020, 6.50% 2023 hold. 2025 cuts: February 25 bps to 6.25%, April 25 to 6.00%, June 25 to 5.75%, August 25 to 5.50%. Rhythms? Resonant—RBI's resolve, rate's repose.

October's Outlook: Hold's Horizon and Hopes Ahead

Outlook October: Hold 5.50%, horizon hazy—inflation 3.8% August, September CPI September 12 (expected 4.0%). Hopes? Headwinds—Fed easing, oil $82, rupee 83.5. Ahead? Anticipatory—RBI's rhythm, economy's rise.

September 26, 2025, October's oracle—RBI's 5.50% hold, economy's even. Das's dashboard, MPC's mandate—stability's song.