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The RBI meeting of MPC will be held from 29 to 30 September and its decision will come on 1 October.
The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) can cut interest rates by 25 basis points in its September meeting. This information was given in a latest report of State Bank of India i.e. SBI.
If this happens, the loans and interest rates may be slightly reduced, which can provide relief to common people and traders. The report said that inflation is completely under control and it is expected to decrease further.
Inflation can be below 2% in September-October
According to the SBI report, inflation rates may be below 2% in September and October and by financial year 2027 it is likely to remain 4% or less. If the GST rates change, inflation may fall by 1.1% in October, which will be the lowest after 2004.
If the RBI no longer reduces rates, it will be a “type 2 error”
The SBI report also stated that in 2019, there was a decrease of about 35 basis points in inflation due to the reduction in GST rates. Therefore, right now is the right time to cut interest rates.
If the RBI no longer reduces rates, it will be a “type 2 error”, that is, to take a wrong decision on the right occasion. It has also happened earlier also when RBI did not reduce interest rates despite favorable conditions.
The measure of interest rate cuts has been high since June
The report also emphasized that the measure of interest rate cuts has been high since June. Therefore, RBI has to keep its point clearly and accurately. The Central Bank’s Communication Policy is a big weapon in itself.
RBI’s next meeting will be held on 29-30 September
The RBI’s next meeting will be held on September 29-30 and its decision will come on 1 October 2025. If RBI cuts interest rates, this may be a good sign for the economy.
Because this will make the debt cheaper and boost business. It remains to be seen whether RBI takes advantage of this opportunity or takes a vigilant stance.
The previous meeting of MPC took place from 4 to 6 August
The previous meeting of RBI’s MPC took place from 4 to 6 August. In this meeting, RBI did not change the repo rate. It was kept at 5.5%. Earlier, RBI had reduced the interest rate by 0.50% to 5.5% in June.
RBI Governor Sanjay Malhotra had said that all the members of the committee were in favor of keeping the interest rates stable. This decision has been taken due to tariff uncertainty. The rate at which RBI gives loan to banks is called repo rate. Not changing this means that interest rates will neither increase nor decrease.
Repo rate reduced by 3 times this year, 1% cut
The RBI had reduced the interest rates from 6.5% to 6.25% in the meeting held in February. This deduction was done by the Monetary Policy Committee after about 5 years.
The interest rate was reduced by 0.25% in the meeting held in April for the second time. For the third time in June, the rates were reduced by 0.50%. That is, the Monetary Policy Committee reduced interest rates by 1% at three times.
Why does the Reserve Bank increase and reduce the repo rate?
Any Central Bank has a powerful tool to fight inflation as a policy rate. When inflation is very high, the Central Bank tries to reduce money flow in the economy by increasing the policy rate.
If the policy rate is high, then the loan from the Central Bank to the banks will be expensive. In return, banks make loans expensive for their customers. This reduces money flow in the economy. If the money flow is low, there is a decrease in demand and inflation decreases.
Similarly, when the economy goes through a bad phase, there is a need to increase money flow for recovery. In such a situation, the Central Bank reduces the policy rate. This makes banks cheaper from central bank and customers also get loans at a cheaper rate.
RBI meets every two months
The Monetary Policy Committee consists of 6 members. Of these, 3 are of RBI, while the rest are appointed by the central government. The RBI meeting takes place every two months.
Recently, the Reserve Bank had issued a schedule for the meetings of the Monetary Policy Committee of FY 2025-26. There will be a total of 6 meetings in this financial year. The first meeting was held on 7-9 April.
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