RBI Governor to announce decision on repo rate today; Economists expect a pause, the industry’s eyes are turned

Sanjay Malhotra, Governor of the Reserve Bank of India (RBI) | Photo credit: HEMANSHI KAMANI

Financial markets remain divided on expectations from the MPC, with economists largely anticipating a pause in rate action, while some industry voices believe the time is right for a rate cut.

Economists expect the central bank to continue its current stance, supported by strong economic indicators.

The robust GDP growth of 8.2 percent and low inflation levels may allow the RBI to keep the policy rate stable at 5.5 percent. The contrasting macroeconomic signals have led to debate about the direction of monetary policy.

Speak with YEARSMehul Pandya, MD and Group CEO of CareEdge Ratings, said both strong GDP growth and long-standing low inflation provide opposing signals for interest rate decisions.

He stated: “Both developments (of continued strong GDP growth and multi-year low inflation levels) are opposing forces from an interest rate perspective. Central banks generally do not tend to cut interest rates during periods of strong economic activity, represented by GDP growth. At the same time, central banks usually respond to a low inflationary environment by cutting interest rates.”

A report from Bank of Baroda also expects interest rates to remain unchanged. The report said that the Reserve Bank of India (RBI) is expected to maintain the repo rate at 5.50 percent in its upcoming monetary policy announcement on Friday. It added that the central bank is also likely to maintain its current neutral stance.

The report said, “We expect the RBI to keep the repo rate stable at 5.50 percent on December 25. The stance is also expected to remain neutral.”

However, some industry leaders see room for a rate cut as inflation continues to decline.

Rohit Arora, CEO and co-founder of Biz2X and Biz2Credit, believes that the current situation strengthens the case for a 25 basis point cut in policy rates. He added that declining inflation and market expectations point to an opportunity for the RBI to take a more supportive policy direction.

Arora said, “As inflation continues to decline and financial markets increasingly price in a 25 basis point cut, the upcoming policy review presents a strong opportunity for the RBI to adopt a more supportive stance.”

During the last monetary policy on October 1, the RBI maintained the repo rate at 5.5 percent.

In a unanimous decision, the Monetary Policy Committee left the policy repo rate unchanged. The governor had said that the MPC would meet on September 29, 30 and October 1 to discuss economic conditions and determine the interest rate trajectory.

After a detailed review, the committee unanimously decided to maintain the rate at 5.5 percent.

With this decision, the interest rate of the Standing Deposit Facility (SDF) also remained unchanged at 5.25 percent, while the interest rate of the Marginal Standing Facility (MSF) and the bank interest rate remained at 5.75 percent.

The Standing Deposit Facility (SDF) rate refers to the interest rate that the RBI pays to banks that deposit their excess uncollateralized funds with the central bank on an overnight basis. Today’s announcement will determine whether the central bank moves toward policy easing or continues to prioritize stability amid strong growth momentum.

Published on December 5, 2025