October 2025 RBI MPC minutes says, “Tread Carefully on Rate Cuts”

16 Oct 2025 , 10:47 AM

A SECOND PAUSE; AND PERHAPS LONGER

When the RBI Monetary Policy Committee (MPC) meeting concluded on October 01, 2025; it was unanimously decided to hold status quo on repo rates at 5.50%. The RBI MPC evinced confidence in the Indian economy by raising GDP growth forecast for FY26 by 30 bps and cutting inflation forecast by 50 bps. But the question remains; Will RBI undertake more rate cuts in 2025, or should we have to wait for 2026. On October 15, 2025, the MPC minutes were published, but they did betray a sense of caution amid a broad willingness to cut rates. Here is a gist of the MPC discussions.

• NAGESH KUMAR FAVOURS RATE CUT DUE TO INFLATION

Nagesh Kumar underlined that the combination of abundant food production and the all-round cuts in GST will continue to have a disinflationary impact on Indian economy. That was evidenced by the fact that the RBI had already cut the inflation estimates for FY26 by a full 220 basis points between February 2025 and October 2025. However, Nagesh Kumar also underlined that being ready may not be the same as being willing to cut rates as there are monetary and fiscal considerations. Kumar voted for status quo on rates and continuation of the Neutral Stance of Monetary policy.

• SAUGATA BHATTACHARYA SAYS RATE CUTS WERE FRONT-LOADED

Saugata Bhattacharya was of the view that every action has a context, and in this case, the context was that; RBI had already front-loaded with 100 bps rate cut between February and June 2025. He added that while the rate cuts were getting transmitted, the economy was also exposed to the tariff, visa, and the US shutdown risks at a macro level. Bhattacharya admitted that while structurally low inflation did make a case for more rate cuts, the question was whether a rate cut would really serve the objectives of monetary policy. Saugata Bhattacharya voted for status quo on rates and continuing the neutral stance.

• PROF RAM SINGH VOTES FOR SHIFT TO ACCOMMODATIVE STANCE

Prof Ram Singh of the Delhi School of Economics agreed with the other MPC members that despite low inflation, there was a case for a pause on rates by the RBI. That would allow other fiscal measures like the GST cut to fully sink in. However, Ram Singh suggested that it was time to change the policy stance of the RBI from Neutral to Accommodative. He agreed that while the macros were favouring a rate cut, at a policy level there was no pressing need for a rate cut. However, the RBI MPC could give the right signal to the market by shifting the stance; indicating its willingness to support growth with rate cuts.

• INDRANIL BHATTACHARYA CALLS FOR SENDING RIGHT MESSAGE

According to Indranil Bhattacharya, the current combination of growth and inflation does open up policy space for more rate cuts. But there are more pragmatic considerations too. For instance, he feels that with uncertainty in the current context, rate cuts may not have the desired impact. Also, it will take more time for the 100-bps rate cut and the 100 bps CRR cut to fully sink in. He also underlined that any shift to an accommodative stance at this juncture could be construed as a forward guidance on rates, which may be inappropriate. After all, “In monetary policy, the cost of sending a wrong message can be high.”

• POONAM GUPTA FAVOURS WAITING FOR CONSUMER PLAY

Dr Poonam Gupta made in interesting point that the growth in Q1 at 7.8% was largely on the back of consumer demand. That consumer demand would get magnified by GST cuts.  Hence, it would be best for RBI to wait for that impact also to play out. She aptly underlined that a rate cut at this juncture would not only be ineffective, it would also reduce the ammunition with the RBI to handle macro risks at a later stage. In these conditions, Poonam Gupta voted for status quo on rates and maintaining the monetary policy stance at Neutral.

• RBI GOVERNOR WANTS CAUTION ON GROWTH OPTIMISM

The RBI governor believes that many of the macro risks like tariffs, visa costs, and the US shutdown could play out in the second and third quarters of FY26. He also added that the fall in inflation was more due to better supply management by the government and hence the benefits may be one-time. In short, the growth outlook may be softer than the current level of growth. Governor Sanjay Malhotra also added that in a foggy global macro-outlook, the best strategy would be for the RBI to be armed with a solid Plan-B.

The minutes are explicit; any rate cut from here will have to be deliberated in terms of costs and benefits. While being supportive of growth, RBP MPC has also underlined the limits of monetary policy. One thing is clear; the RBI will not offer any forward guidance on the rates trajectory. In a sense, that is the right strategy!