The Reserve Bank of India (RBI) Monetary Policy Committee will meet from Monday (September 29) to October 1, and is widely expected to keep the repo rate unchanged for the second consecutive policy amid strong GDP growth and expectations of benign inflation.The six-member panel is unlikely to alter its present ‘neutral’ monetary policy stance. Here is why.What can be anticipated from the monetary policy?Most economists expect that the MPC will continue to maintain the status quo in the upcoming monetary policy, to be announced on October 1. This would be the second time in a row that the RBI may take a pause. Between February and June 2025, the repo rate has been cut by 100 bps to 5.5 per cent currently.“The Monetary Policy Committee is anticipated to maintain the status quo on the repo rate in its October 2025 review. This view is supported by the positive impact of GST reforms on demand, stronger-than-expected Q1 FY2026 GDP growth, and an inflation trajectory that, while lowered due to GST rationalization (FY2026 average now ~2.6 per cent), is expected to slope upwards thereafter,” said Aditi Nayar, Chief Economist, ICRA Ltd.In April-June 2025 quarter, GDP growth rose to a five-quarter high of 7.8 per cent, compared to 6.5 per cent in the year-ago period and 7.4 per cent in January-March 2025. The government then introduced a two-slab structure of 5 per cent and 18 per cent, effective September 22, abolishing the earlier four-rate tax regime. Lower GST rate will further strengthen the consumption growth drivers.Editorial | RBI keeps interest rates unchanged. But what will dictate policy action?“RBI is likely to remain on pause in October awaiting for clarity on GST impact and tariffs,” said Gaura Sengupta, Chief Economist, IDFC FIRST Bank. RBI’s assessment on current growth conditions is positive with pickup in rural demand and government capex. Meanwhile urban consumption and private capex remains subdued, she added.Goldman Sachs noted in a report that the headline inflation is expected to remain benign on lower food inflation and pass-through of lower GST rates to consumer prices. In August, headline inflation accelerated to 2.7 per cent from an eight-year low of 1.61 per cent in July.Story continues below this ad“Assuming a partial pass-through of lower GST rates, we recently lowered our headline inflation forecasts for CY25 and FY26 by 0.2 percentage points and 0.3 percentage points to 2.8 per cent year-on-year,” Goldman Sachs said in the report.The MPC meet is happening at a time when India and the US are in discussion to finalise a trade deal, following US President Donald Trump’s decision to impose a steep 50 per cent tariff on Indian goods. The outcome of these talks is expected to have a significant impact on the country’s economic growth. The meeting also comes after the US Federal Reserve’s decision to lower the interest rate by 25 bps to 4-4.25 per cent, marking its first cut in 2025.Is a change in the policy stance expected?Economists believe that the MPC will maintain the ‘neutral’ stance in the forthcoming policy. In the June 2025 policy, the MPC had changed the policy stance to ‘neutral’ from ‘accommodative’. Neutral stance will mean that the rate can move in either direction, depending on the evolving economic data.Will RBI revise GDP and inflation forecast?Bank of Baroda’s Chief Economist Madan Sabnavis expects the Reserve Bank to keep the GDP forecast unchanged but may lower inflation projection by 0.5 per cent for FY26.Story continues below this adIn the August policy, RBI retained its real GDP growth projection at 6.5 per cent in FY26 but sharply lowered its inflation estimate to 3.1 per cent from an earlier expectation of 3.7 per cent.“The GST rationalisation could dampen the headline CPI (consumer price index) prints by 25-50 bps during Q3 FY2026-Q2 FY2027 relative to our pre-GST rationalisation estimates, taking the average for FY2026 to around 2.6 per cent (vs 3 per cent earlier),” said Aditi Nayar of ICRA. While October-November 2025 may mark a fresh low for the CPI inflation, the trajectory subsequently remains upward sloping, she added.The RBI has projected at CPI inflation at 3.1 per cent in Q3 FY26; 4.4 per cent in Q4 FY26, and 4.9 per cent in Q1 FY27.What happens to lending rates if the repo rate is left unchanged?If the RBI leaves the repo rate steady at 5.5 per cent, all external benchmark lending rates (EBLR) linked to the repo rate will not be changed. However, lenders may revise their interest rates on loans that are linked to the marginal cost of fund-based lending rate (MCLR).