No Repo Rate Cuts In October; Is This Prediction By The HDFC Right Or Not?

As India’s economy navigates post-pandemic headwinds, supply chain disruptions, and evolving global pressures, the Reserve Bank of India (RBI) must balance the twin goals of sustaining growth and anchoring inflation. 

In recent commentary, analysts have suggested that the RBI is likely to hold its key policy rate in the October 2025 Monetary Policy Committee (MPC) meeting, with any shift in strategy, particularly rate cuts, deferred potentially to December. 

Against this backdrop, this article explores the rationale, risks, market expectations, and implications of such a decision, augmenting the core narrative with fresh data and critical analysis.

1. Macroeconomic Context: Growth, Inflation & Liquidity

Growth trajectory and headwinds

India’s real GDP growth has shown resilience: in the April–June quarter of FY26, growth surprised on the upside, and many analysts expect full-year growth of ~6.5 %. However, domestic private investment remains tepid, and the transmission of past rate cuts to credit demand has been uneven. 

The RBI must weigh whether additional easing would meaningfully stimulate new investment or simply feed speculative excesses.

Inflation trends and disinflation space

Retail inflation (CPI) has remained generally within the RBI’s 2 %–6 % tolerance band in recent months. In fact, in its August 2025 MPC meeting the RBI revised its inflation forecast downward. Some economists argue that inflation pressures are now sufficiently benign to allow more policy flexibility. 

That said, inflation remains vulnerable to upside shocks from food inflation, volatile global commodity prices, or adverse weather, all of which could force a cautious posture.

Liquidity conditions and monetary metrics

Liquidity in the banking system has oscillated between surplus and mild deficit phases. During FY26, rising tax outflows have pushed the system into deficit, prompting RBI interventions. Meanwhile, in its August 2025 policy, the RBI confirmed that the phased cut in cash reserve ratio (CRR) would begin in September 2025, aiming to inject durable liquidity into the system. This provides additional room for banks to lend without pushing up interest rates sharply.

Taken together, the policy space for RBI is shaped by moderating inflation, fragile demand, and evolving liquidity dynamics.

2. Market Expectations & Polls: Holding in October, Cut in December

To understand how market participants view the RBI’s likely moves, it is useful to look at the consensus from recent polls and surveys.

Selected Polls / Analyst Views on RBI Policy Moves
 

The table above consolidates evidence from recent market surveys and analyst commentary that point toward a likely hold in October, with the possibility of easing decisions being reserved for December or later. The pattern reflects a cautious “wait-and-see” approach adopted by participants.

The polls collectively suggest that the markets believe the RBI will not be eager to act aggressively in October, instead, decision-makers may prefer to observe more inflation, growth, and fiscal data before pivoting. If December becomes the next feasible window for easing, it underscores the RBI’s emphasis on data dependency and policy flexibility.

Beyond the polls, many economists have flagged that the RBI will likely shift its policy stance (e.g. from accommodative to neutral) before executing rate cuts. This signals readiness to act, while retaining optionality.

3. Key Risks & Decision Drivers for RBI

Even if consensus leans toward holding in October and possibly cutting in December, multiple risks and drivers could alter that path.

Food inflation and supply shocks

A significant upside risk is food inflation, especially in the event of erratic monsoon patterns, crop failures, or supply disruptions. Such pressures could derail disinflation momentum and constrain RBI’s ability to ease.

Global environment and external shocks

The RBI must navigate external uncertainties — trade tensions, volatile crude oil, currency pressures, or global monetary policy shifts. A sudden surge in import prices, exchange rate depreciation, or tightened global financial conditions could stiffen inflationary pressures, compelling RBI to pause or delay cuts.

Transmission lag and cautious calibration

Past rate cuts often take time to fully impact credit flows. The RBI may prefer to allow earlier cuts (e.g. in February, June) more time to percolate through before further adjustments. This has implications for the pace and scale of future cuts.

Fiscal dynamics

Large fiscal deficits or aggressive government spending could either complement or counter RBI’s push. In particular, if fiscal expansion becomes inflationary, it may erode room for monetary easing.

Given these, the RBI’s MPC is likely to remain cautious and deliberate in deciding whether to shift in December.

4. Implications for Markets, Borrowers & Banks

A hold in October and potential cut in December would have ripple effects across various sectors.
 

• Bond & Fixed Income Markets: A hold could yield stable yields or mild rally if markets had anticipated cuts. A December cut might offer fresh support to bond markets.
   
• Bank Lending & Credit Growth: Banks would benefit from the CRR cuts and liquidity support; more benign funding costs might gradually reflect in lower lending rates, though margin pressures could persist.
   
• Borrowers & Consumers: Waiting for cuts means EMIs remain stable in the near term; but expectations of easing could shape borrowing decisions, especially in housing, auto, and consumer credit segments.
   
• Equity & Growth Stocks: Rate cuts tend to favor growth sectors (tech, capital goods). If the RBI signals easing ahead, equity sentiment may get a boost.
   
• Currency & External Flows: A dovish pivot needs to be balanced to avoid undue pressure on the rupee; foreign inflows and exchange stability will be strong considerations.
   

Ultimately, the sequencing and communication around cuts will matter as much as the cuts themselves.

5. What to Watch: Indicators That Could Change the Play

The RBI’s October decision will likely hinge on the evolution of several critical indicators in the coming weeks:
 

1. CPI & Core Inflation prints: If inflation stays well below target, easing becomes more viable.
    
2. WPI / Producer inflation: Upstream price pressures could inform future inflation risks.
    
3. Credit growth & banking data: If credit off-take remains weak, it strengthens the case for stimulus.
    
4. Global commodity prices / oil: Crude price spikes would constrain flexibility.
    
5. Monsoon & agricultural data: Poor outcomes could reignite food-led inflation.
    
6. Fiscal updates / budget cues: Any unanticipated expansion or fiscal slippage could impinge on RBI’s space.
    

The RBI often employs “forward guidance” via its stance change before actual cuts, markets should watch for subtle shifts in language or tone in the October policy statement.

Conclusion

In sum, the broader assessment suggests the RBI is likely to hold policy rates in its October 2025 meeting, but maintain flexibility to revisit cuts in December — provided inflation remains benign and growth shows signs of moderation. Polls and analyst commentary overwhelmingly reflect this “pause-and-prepare” expectation.

However, this path is not set in stone. Upside risks to inflation, global shocks, and weaker-than-expected transmission could force the RBI into a more defensive posture, delaying cuts further. On the flip side, if data continue to surprise to the downside on growth, the central bank could accelerate easing beyond December.

From a policy perspective, the RBI must calibrate carefully: maintain credibility in inflation control while offering relief to a lagging macro recovery. For markets, borrowers, and financial intermediaries, much depends on not just whether a cut comes, but how and when it is communicated and phased. The coming months will be critical to deciphering the RBI’s true pivot moment.

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