Despite moderating growth and lowered inflation forecast, why did RBI MPC hold off on rate cut in October?

While the recent US Fed Rate cut and benign domestic inflation had raised hopes in certain sections of the Indian markets that RBI would oblige with a rate cut in October 1 policy, the RBI Monetary Policy Committee (MPC) kept rates on hold and continued its ‘neutral’ policy stance. This was completely in line with our own expectations.

The MPC is of the view that India’s growth has been resilient despite the global uncertainties caused by tariffs and geopolitical issues. The high frequency indicators are suggesting sustained momentum in Q2FY26, with buoyancy in the services sector, employment conditions remaining steady, capacity utilization rising and domestic demand showing an improvement. The favourable monsoon, low inflation and RBI’s rate cuts, along with the GST rationalization by t