RBI will announce a policy decision as markets eye a possible rate cut

RBI has kept the benchmark interest rate at 6.5% since February 2023 after raising it by 250 basis points during the tightening cycle. | Photo credit: FRANCIS MASCARENHAS

Market participants are closely watching whether the RBI will cut the repo rate from the current 6.5 percent, amid easing inflation and expectations of a rate cut by the US Federal Reserve next week. The central bank has maintained interest rates at 6.5 percent since February 2023, after raising them by 250 basis points during the tightening cycle.

Recent economic data paints a mixed picture for policymakers. India’s GDP grew 8.2 percent in the second quarter of fiscal 2026, the fastest pace in six quarters, while CPI inflation fell to 0.25 percent in October. “Tackling inflation on the back of the GST rate cuts, ongoing food price deflation and a steady decline in core inflation have boosted hopes that the RBI can lay the groundwork for a rate cut in early 2026,” said Ajay Garg, CEO of SMC Global Securities.

However, some analysts urge caution. “Recent data following the October MPC meeting has made the prospects for a rate cut in December harder to predict,” said Umesh Sharma of The Wealth Company Mutual Fund, citing strong demand, rising credit growth and tight system liquidity due to currency intervention.

The possible rate cut by the Fed on December 9 and 10 could influence the RBI’s decision. “A Fed rate cut is important for India as it narrows the interest rate gap between the two countries,” explains Abhinav Tiwari of Bonanza, adding that this gives the RBI more flexibility to adjust policy without triggering an outflow of foreign investors.

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Published on December 4, 2025