RBI MPC Policy: Repo Rate Held at 5.50%, Inflation Forecast Revised Lower

The RBI finalized its latest MPC meeting, holding the repo rate steady at 5.50% while lowering inflation projections for FY26 and beyond.

This announcement has drawn attention across the stock market today, as traders and investors react to the central bank’s cautious but balanced stance.

Market Performance: Policy Decisions in Focus

At the 57th MPC meeting held from September 29 to October 1, 2025, the RBI Governor confirmed that the stance remains neutral. The decision to maintain rates was unanimous.

Here’s a quick snapshot of the policy rates:

• Repo Rate: 5.50%
• Standing Deposit Facility (SDF): 5.25%
• Marginal Standing Facility (MSF) & Bank Rate: 5.75%

By holding rates steady, the RBI has signaled its intent to balance growth momentum with the need to keep inflation under check.

Inflation Forecast: Key Numbers Revised

The highlight of this MPC meeting was the cut in inflation forecasts. The RBI now expects lower consumer price index (CPI) inflation across the upcoming quarters of FY26, reflecting easing food prices and better supply conditions.

• Q2 FY26: 1.8% (earlier 2.1%)
• Q3 FY26: 1.8% (earlier 3.1%)
• Q4 FY26: 4.0% (earlier 4.4%)
• Q1 FY27: 4.5% (earlier 4.9%)

This downward revision underlines that price pressures are easing and inflation risks appear more balanced than before.

Stock Market Today: Why Inflation Is Cooling

The sharp decline in inflation during 2025 has surprised many. Headline CPI fell to 1.6% in July 2025—its lowest in eight years—before inching up to 2.1% in August. That was the first rise after nine straight months of decline.

Several reasons stand behind this trend:

• Food inflation eased with better supply and government interventions.
• Stable core inflation, which stood at 4.2% in August.
• Healthy monsoon and sowing conditions, supporting food grain supplies.
• GST rate adjustments, softening prices for many items.

Despite global pressures on commodities like gold and silver, domestic inflation has remained on a softer trajectory.

RBI MPC Policy 2025: Broader Context

The Governor emphasized that supply-side conditions are favorable. Adequate reservoir levels, comfortable food grain stockpiles, and government oversight of supply chains are expected to stabilize prices further.

With inflation tracking below earlier projections, the RBI finds itself in a position to focus on growth while maintaining stability.

Summary

• Repo rate unchanged at 5.50%
• Inflation forecasts cut across Q2, Q3, Q4 FY26 and Q1 FY27
• CPI hit 1.6% in July 2025, lowest in 8 years
• August CPI rose to 2.1%, ending 9 months of decline
• Stance remains neutral