RBI likely to cut repo rate by 25 basis points in December due to low inflation and strong growth: report

The RBI may announce a 25 basis point cut in repo rate at the upcoming December monetary policy meeting, driven by a sharp decline in inflation and strong growth momentum, a report by credit rating agency CareEdge said on Tuesday.According to the report, inflation fell to a ten-year low of 0.3 per cent in October, well below the RBI’s target threshold of 4 per cent, creating policy space for rate cuts.

The current repo rate is 5.5 percent.

“Factors such as stable Brent crude prices, healthy reservoir levels supporting rabi seeding, and moderate price pressures from overcapacity in China should help prevent a sharp rise in inflation,” the report said.

While GDP growth has accelerated to 8.2 percent in the second quarter of the 2025-26 fiscal, CareEdge predicts a moderation to around 7 percent in the second half of the financial year as the boost from forward exports fades and post-festive consumption declines.

For the full fiscal year, the report predicts GDP growth of 7.5 percent.

The report said that with CPI inflation expected to average around 3.7 percent over the next twelve months, the real policy rate at current levels would be around 1.8 percent – ​​above the estimated neutral range of 1-1.5 percent – ​​indicating there is room for a rate cut.

Despite external headwinds, including protracted trade negotiations with the US and geopolitical tensions, India’s external sector remains resilient, with foreign exchange reserves rising by $27 billion to $693 billion as of mid-November, the report said.

CareEdge expects the RBI to revise its FY26 inflation projections to around 2.1 percent and growth forecast to around 7.5 percent at the December policy meeting.