The Reserve Bank of India is expected to maintain its current policy rates in the upcoming October monetary policy review, according to an analysis by the State Bank of India. The projection comes as August 2025 inflation is estimated to rise above 2 percent, making near-term rate cuts unlikely.
Citing the report, ANI said inflation could reach around 2.3 percent in August, which would also complicate prospects for a rate reduction in December. “A rate cut in October looks difficult. Even a rate cut in December looks a tad difficult,” the report noted.
Inflation Trends
India’s retail inflation (CPI) dropped to 1.55 percent in July 2025, the lowest in 98 months, from 2.10 percent in June and 3.60 percent in July 2024. The nine-month decline has been driven largely by falling food inflation, which hit a 78-month low. Food prices fell by 75 basis points in July to -1.76 percent, the lowest since January 2019.
Core inflation eased to 3.94 percent, falling below 4 percent for the first time in six months. When gold is excluded, core inflation dropped further to 2.96 percent — about 100 basis points below the headline core CPI.
Market Impact
After the Monetary Policy Committee cut rates in June and kept them unchanged in August, the 10-year government bond yield has risen from around 6.30 percent in July to over 6.45 percent. The SBI report said yields are likely to remain elevated until there is more clarity on tariffs.
The report also stressed the need to view the yield curve as a “public good,” while recognising that India’s debt market participants behave differently, influencing overall market dynamics.
