The State Bank of India (SBI) expects the Reserve Bank of India (RBI) to cut rates in September. Inflation is falling to a historic low since 2004, helped by GST rationalisation and improving India-US trade talks. The RBI Monetary Policy Committee will meet from September 29 to October 1.
In August, the RBI kept the policy rate at 5.50 per cent after previous easing. Dr Soumya Kanti Ghosh, SBI’s Chief Economic Advisor, said CPI inflation could drop another 65-75 basis points due to GST cuts. Without GST changes, CPI is already below 2 per cent in September and October.
Ghosh added that the 2019 GST rationalisation reduced inflation by 35 basis points in just months. With the new CPI series and base revisions, inflation should stay near the lower end of the RBI target, 4±2 per cent, through FY26 and FY27. October CPI could even reach 1.1 per cent.
SBI believes a September rate cut is justified. Ghosh said the RBI must communicate clearly to avoid mistakes. Lower inflation and stable growth give the central bank room to cut rates and support the economy.
