RBI likely to cut rates by 25 bps each in Oct, Dec MPC; CPI may avg at 2.4% in FY26: Morgan Stanley
(source : ANI) ( Photo Credit : ani)
RBI Set for Rate Cuts: Inflation Cooling Opens Door for Easier Money Policy
Mumbai’s financial buzz is heating up as experts predict the Reserve Bank of India (RBI) will slash its key policy rates soon. According to a fresh report from global giant Morgan Stanley, the RBI’s Monetary Policy Committee (MPC) could cut rates by 25 basis points in both October and December meetings. This move would bring the repo rate down to a comfortable 5 percent, giving the economy a much-needed boost.
Why now? Inflation in India has been playing nice, staying well below the RBI’s 4 percent target. The report highlights that headline Consumer Price Index (CPI) inflation is expected to average just 2.4 percent year-on-year in FY26—way under the radar. For the past seven months, CPI has hovered below 4 percent, thanks to falling food prices and other cooling factors.
Morgan Stanley points out that this low inflation trend isn’t a fluke. It’s fueled by cheap food, recent slashes in Goods and Services Tax (GST) rates, and no big spikes in input costs. Even core inflation, which strips out food and fuel, sits steady at 4.2 percent, while the deeper core-core measure has been under 4 percent for a whopping 22 months. This shows underlying price pressures are truly easing up.
With inflation undershooting and nominal GDP growth looking a bit soft—projected at 8.3 percent for FY26 despite solid real GDP—the RBI has the green light for these rate cuts. Lower rates mean cheaper loans for everyone, from homebuyers to businesses, sparking more spending and investment.
But it’s not all smooth sailing. The report warns that if inflation stays this low for too long, the RBI might dive into deeper rate cuts. On the flip side, nominal growth could drag if external factors bite, like tough US trade talks or new tariffs. Still, lower taxes might perk up domestic demand later in FY26, helping from a low base.
As India eyes steady growth amid global uncertainties, these RBI rate cut predictions are music to investors’ ears. Keep an eye on the October MPC meeting—big changes could be coming!
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