**RBI May Cut Interest Rates Further as Inflation Outlook Improves**
*By Dwaipayan Roy | Oct 04, 2025, 6:22 PM*

The Reserve Bank of India (RBI) has indicated the possibility of further rate cuts, according to a recent report by Crisil Intelligence. This suggestion comes as the central bank’s Monetary Policy Committee (MPC) has sharply revised its inflation forecast downward.

On October 1, the RBI decided to keep the policy interest rate unchanged at 5.5% for the second consecutive time, citing uncertainties related to US tariffs.

### Economic Outlook: Impact of US Tariffs

The Crisil report highlighted that the MPC expects GDP growth to face downside risks in the second half of the fiscal year 2025-26, primarily due to the impact of US tariffs. However, the recent rationalization of GST rates is expected to cushion some of the negative effects.

“Certain labor-intensive sectors are most vulnerable to the impact of US tariffs and need policy support,” the report noted.

### Rate Adjustments So Far

Since February, the RBI has reduced the policy repo rate by a total of 100 basis points. In its last policy review in June, the central bank cut the repo rate by 50 basis points to 5.5%.

The government has mandated the RBI to maintain Consumer Price Index (CPI)-based retail inflation at 4%, allowing a margin of 2% on either side.

### Inflation Control: Retail Inflation Hits Six-Year Low

Following the MPC’s recommendations, the RBI implemented repo rate cuts of 25 basis points each in February and April, followed by a 50 basis point cut in June. These measures were taken as retail inflation steadily declined.

Retail inflation has remained below 4% since February this year and recently dropped to a six-year low of 2.07% in August. This decline is attributed to falling food prices and a favorable base effect.

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With inflation easing and the outlook improving, the RBI’s hint at further rate cuts is seen as a positive move to support economic growth while keeping inflation in check.
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