RBI Policy
With inflation at record low, MPC seen cutting repo rate in Dec
This story was originally published at 16:48 IST on 26 November 2025
Register to read our real-time news.Informist, Wednesday, Nov. 26, 2025
By Shubham Rana
NEW DELHI – The Reserve Bank of India's Monetary Policy Committee is expected to lower interest rates in December to support economic growth with retail inflation ruling at a record low, according to an Informist poll. All but three of 20 economists polled by Informist said they expect the MPC to lower the repo rate at the end of the three-day meeting on Dec. 5. Sixteen economists expect a 25-basis-point reduction in the policy rate to 5.25%, while India Ratings and Research see a 25-50 bps cut next week.
After December, most economists expect the MPC to leave rates unchanged, though some see scope for further easing in February with inflation seen remaining well below the RBI's 4% target. The MPC has lowered the policy repo rate by 100 bps so far in 2025. It started lowering interest rates in February with a 25-bps cut, followed by another 25-bps cut in April, and a larger-than-expected 50-bps reduction in June. The panel has kept the repo rate at 5.50% since June, with the policy stance currently neutral.
The MPC kept interest rates unchanged in October to await the impact of front-loaded monetary policy actions and fiscal measures amid uncertainties following the US's imposition of a 50% tariff on India. In its statement, the committee said that macroeconomic conditions and the outlook have opened up policy space to further support growth. On Monday, RBI Governor Sanjay Malhotra said that recent macroeconomic indicators suggest scope for further rate cuts.
Recent data shows inflation is at historical lows while the pace of economic growth is expected to moderate. CPI inflation fell to a record low of 0.25% in October, while GDP growth, data for which will be released on Friday, is seen moderating to 7.2% in the September quarter from a five-quarter high of 7.8% in Apr-Jun, but higher than the RBI's forecast of 7.0%.
Retail inflation has remained low for most of the current financial year and is expected to remain benign till the June quarter of FY27. The RBI has projected FY26 CPI inflation at 2.6%, but economists see it even lower, around 2%. "... tracker for November suggests that soft CPI inflation prints are here to stay. As the RBI MPC recognises this and likely revises down its inflation forecast for FY26 further lower in the upcoming 5 December meeting, we expect the MPC to deliver the last rate cut for this cycle, taking the terminal rate to 5.25%," Barclays said in a report.
Growth, on the other hand, has exceeded expectations. At 7.8%, GDP growth in Apr-Jun had exceeded all expectations, even as the headline print was propped up by the statistical effect of low inflation. GDP growth is expected to lose momentum after the September quarter.
"While such a strong growth outcome would otherwise be seen as a deterrent to a rate cut, it is important to note that growth has peaked and H2FY26 (Oct-Mar) growth is estimated to be lower than H1 (Apr-Sept)," Barclays said. The RBI has projected GDP growth in FY26 at 6.8% with the pace of expansion seen slowing to 6.4% in the December quarter and 6.2% in the March quarter.
Economists who expect a pause in interest rates next week said the panel may lower the repo rate only if growth falters. "The December RBI policy will be set against a backdrop of resilient growth and ultra-low inflation, making it a close call between a cut and a pause. However, RBI is expected to maintain the status quo as space for easing is limited and should be utilised when downside risk to growth materialises," Gaura Sen Gupta, chief economist at IDFC FIRST Bank, said in a report.
The September quarter GDP data could be the deciding factor for the MPC on Dec. 5. Even some economists said they would reassess their interest rate call based on the GDP data on Friday.
The following are expectations of respondents from the Dec. 3-5 meeting of the MPC:
| ORGANISATION | DECEMBER MEET EXPECTATION |
| Acuite Ratings and Research | 25 bps cut |
| Barclays | 25 bps cut |
| Capital Economics | 25 bps cut |
| CareEdge Ratings | 25 bps cut |
| Crisil | 25 bps cut |
| DBS Bank | 25 bps cut |
| Deutsche Bank | 25 bps cut |
| ICICI Bank | Status quo |
| ICICI Securities Primary Dealership | 25 bps cut |
| ICRA | 25 bps cut |
| IDFC FIRST Bank | Status quo |
| India Ratings and Research | 25-50 bps cut |
| Kotak Mahindra Bank | 25 bps cut |
| Morgan Stanley | 25 bps cut |
| MUFG Bank | 25 bps cut |
| Nirmal Bang Equities Pvt. Ltd. | 25 bps cut |
| Nomura | 25 bps cut |
| STCI Primary Dealer | 25 bps cut |
| Union Bank of India | 25 bps cut |
| YES Bank | Status quo |
End
Edited by Saji George Titus
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