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The case for RBI rate cuts: Space, need, and timing

Business Standard

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September 30, 2025

As the Monetary Policy Committee of the Reserve Bank of India (RBI) meets, we believe there is a case for resuming rate cuts, based on space, need, and timing considerations.

- SONAL VARMA

The case for RBI rate cuts: Space, need, and timing

Space for easing

The inflation backdrop provides ample room. Core inflation has edged up, but mainly driven by gold prices. Underlying inflation measures such as the trimmed mean and super core are closer to 3 per cent. Even the year-ahead inflation projections showing an uptick above 4 per cent, largely reflect an unfavourable base rather than emerging price pressures. The upcoming GST rationalisation should have a disinflationary impact of 0.3-0.4 percentage points, but this is likely to be a one-off. After adjusting for the GST impact, inflation is still undershooting the target.

Need for support

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