25 bps rate cut is best possible option for RBI OCT MPC meet: SBI economists

Group 1 - A 25 basis points rate cut is considered the best option for the Reserve Bank of India (RBI) in the upcoming October monetary policy review, requiring careful communication from the central bank due to higher expectations for rate cuts post-June [1] - Economists suggest that inflation will remain benign, tracking below 2% in September and October, with CPI FY27 numbers expected to be around 4% or less, potentially dropping to 1.1% in October, the lowest since 2004 [2][4] - The CPI inflation may decline further by 65-75 basis points due to significant GST rationalization, with historical data indicating that previous rate rationalization led to a 35 basis points decline in overall inflation within a few months [3] Group 2 - The new CPI series is expected to show further moderation of 20-30 basis points, indicating that CPI inflation will likely remain at the lower end of the inflation target (4±2%) for FY26 and FY27 [4] - A rate cut is viewed as the best option given the benign inflation trajectory, positioning the RBI as a forward-looking central bank, while maintaining a status quo with a shift to an accommodative stance is seen as a second-best option [5] - The RBI has cut its policy repo rate by a cumulative 100 basis points since February, reducing it from 6.50% to 5.50% [6]