The Reserve Bank of India (RBI) might announce another interest rate cut before the end of the year, with its Monetary Policy Committee (MPC) having sharply revised its inflation forecast downwards, as per a report by a ratings agency.
The suggestion of another repo rate cut by the RBI was made by Crisil Intelligence in its latest report after the central bank kept its policy interest rate unchanged on October 1 for the second consecutive time at its bi-monthly policy meeting, citing concerns over uncertainties surrounding US tariffs on Indian imports.
The report said the MPC acknowledged that GDP growth would face downside risks in the second half of the current financial year (2025-26), due to the impact of US tariffs.
However, Crisil also took into account the effect that the recent rationalisation of GST rates will have, partially offsetting the overall impact.
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“Certain labour-intensive sectors are most vulnerable to the impact of US tariffs and need policy support. With inflation becoming a less worry this fiscal, the initiation of US Federal Reserve’s rate cuts will provide space for the RBI to cut rates,” the report stated.
The RBI has reduced the policy rate by 100 basis points since February, 2025, having trimmed the repo rate by 50 basis points to 5.5 per cent in its previous policy review in June amid easing retail inflation. In February and April, it had reduced the repo rate by 25 bps each.
The Centre has tasked the apex bank to ensure that Consumer Price Index (CPI)-based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
The retail inflation is trending below 4 per cent since February this year, having eased to a six-year low of 2.07 per cent in August, aided by an easing of food prices and favourable base effect.
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