It is unlikely that the Reserve Bank of India (RBI) will lower interest rates in its policy meeting in October, because inflation is expected to rise above 2 percent in August 2025, according to a report from the State Bank of India (SBI).
Even a rate reduction in December can be a challenge if growth meters are taken into account for the first and second quarter. It stated: “A rate reduction in October looks difficult. Even a rate reduction in December looks a bit difficult”. Indian store inflation (CPI) illuminated in July 2025 to a lowest point of 98 months of 1.55 percent, compared to 2.10 percent in June 2025 and 3.60 percent in July 2024.
This meant the ninth consecutive month of decline, mainly driven by a sharp decrease in food inflation, which dropped to a layer of 78 months. Food inflation fell in July 2025 with 75 basic points from the previous month. With -1.76 percent it was the lowest since January 2019, when it was -2.24 percent.
Core inflation also saw a sharp delay and for the first time in six months fell under 4 percent to 3.94 percent. Gold prices released, core inflation fell even further to 2.96 percent in July 2025, almost 100 basic points lower than the COPI CPI.
Since the Monetary Policy Committee (MPC) reduced the rates in June 2025 and maintained a status quo in August, the 10-year return of the government bonds has risen. From around 6.30 percent in July it has now crossed the 6.45 percent.
The report added that the bond returns will probably not be moderate until there is clarity about rates. It also noted that the yield curve should be treated as a public interest, and on the Indian debt market it is common for market players to behave differently.
Published on August 13, 2025
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