The consumer price index (CPI)-based headline retail inflation rate is below the 2 percent lower bound imposed by the government in the past two months.
However, some experts believe that the RBI may continue the interest rate pause now that economic growth has picked up, supported by fiscal consolidation, targeted government investments and various reforms such as the reduction in the GST rate.
The meeting of the Monetary Policy Committee is scheduled for December 3 to 5, 2025.
RBI Governor Sanjay Malhotra is expected to announce the rate panel’s decision on December 5.
The central bank started its interest rate easing cycle in February last year. She cumulatively cut the repo rate by 100 basis points to 5.5 percent in successive policy announcements before hitting the pause button in August.
According to some experts, the RBI may cut rates by 25 basis points at its upcoming monetary policy meeting as inflationary pressures are subdued. Consumer price index (CPI)-based headline retail inflation has been below the government-imposed lower limit of 2 percent for the past two months.
However, some experts believe that the RBI may continue the interest rate pause now that economic growth has picked up, supported by fiscal consolidation, targeted government investments and various reforms such as the reduction in the GST rate.
This year, the story has been about overshooting growth and undershooting inflation, said an HDFC Bank report.
“Hence, the upcoming RBI rate decision remains a close call. But given the continued risks to growth (in the second half) and inflation expected to remain well below 4 percent till the third quarter of FY27, we see that there is still a chance of a further rate cut of 25 basis points with the upcoming policy,” the report said.
A research report by the economic research arm of the State Bank of India said that given strong GDP growth and minimal inflation, it is now up to the RBI to communicate the interest rate trajectory to the broader markets at this week’s MPC meeting, while continuing with the neutral stance.
On what the RBI’s MPC might decide in the policy ahead, Bank of Baroda Chief Economist Madan Sabnavis said: “It would be a close call on the repo rate. Given that monetary policy is forward-looking and inflation is likely to be around 4 per cent plus in Q4-FY26 and FY27, giving a real repo rate of 1-1.5 per cent, the policy rate seems to be at a reasonable level.
“Under these circumstances, we do not think there should be any change in the policy rate,” he said.
Dharmakirti Joshi, chief economist at Crisil, said food inflation is the main driver behind headline inflation falling below the lower end of the RBI’s target range of 2-6 per cent, although fuel inflation has also remained subdued.
Excluding gold, core inflation stood at 2.6 percent in October, supported by GST cuts, he said.
“We expect a 25 basis point cut in the repo rate in December. While growth remains robust, a significant decline in retail inflation in October has created additional room for this adjustment,” Joshi said.
Experts believe that the guidance is expected to be neutral to dovish, ensuring sufficient liquidity and hinting at further scope for rate cuts with evolving growth dynamics.
Based on expectations from the 58th interest rate panel meeting, Mandar Pitale, Head of Financial Markets, SBM Bank (India), expects the MPC to maintain the status quo in the December policy review.
“This is in light of the need to attract interest rate sensitive flows to support the BoP and to avoid exacerbating the immediate issue of resource mobilization for banks as a rate cut could drain private resources from the banking sector,” he said.
ICRA Chief Economist Aditi Nayar opined that with GDP growth exceeding 8 percent in the second quarter of 2026, a rate cut in the December 2025 MPC review now seems unlikely despite the streak of low CPI inflation for October 2025.
The government has directed the RBI to ensure that retail inflation remains at 4 percent, with a margin of 2 percent on either side.
Ashok Kapur, chairman of Krishna Group and Krisumi Corporation, felt that with inflation hovering at record low levels, the RBI undoubtedly has the policy space to consider a 25 basis point rate cut.
The housing and allied sectors, as well as the broader economy, are already benefiting from the GST rationalization and the RBI’s cumulative rate cuts of 100 basis points earlier this year, he said.
A further cut at this juncture would undoubtedly strengthen the ongoing growth momentum, Kapur said.
Published on November 30, 2025
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