A new study by the State Bank of India suggests that the Reserve Bank of India should consider cutting the repo rate by another 25 basis points in its upcoming policy review. With inflation expected to remain subdued, SBI believes further easing could support growth without stoking price pressures.

Breakdown:
Context: The RBI has already lowered the repo rate by 100 basis points since February, bringing down borrowing costs. After three consecutive cuts, the central bank paused in August. The Monetary Policy Committee, led by the RBI Governor, is set to meet on September 29, with its decision due on October 1.

Angles: SBI’s assessment highlights that CPI-based retail inflation remains well within the RBI’s target band and is likely to stay benign through the next financial year. With global demand cooling and domestic growth needing support, the study argues that a calibrated rate cut is the most effective way to balance stability and stimulus.

What’s Next: All eyes are on the upcoming MPC meeting. While some analysts expect the RBI to maintain its pause, SBI’s recommendation adds weight to calls for easing. The final decision will depend on how the central bank weighs inflation risks against the need to stimulate growth.

Why this matters:
A repo rate cut directly impacts borrowing costs for businesses and households, influencing investment, consumption and credit demand. At a time when growth momentum is fragile, lower rates could provide timely relief, though excessive easing could risk financial imbalances.

The Big Picture:
India’s monetary policy remains a balancing act between growth and inflation. If the RBI follows through with another rate cut, it would reinforce a pro-growth stance and align with the global trend of easing, but it will also test the central bank’s credibility on maintaining price stability.