RBI Cuts Repo Rate by 25bps: MPC Goes Unanimous, Markets Rejoice!
The Reserve Bank of India (RBI) is widely expected to keep the policy repo rate unchanged at 5.5 per cent in the upcoming December Monetary Policy Committee (MPC) meeting, according to a report by YES Bank. With limited room for additional rate cuts, the central bank is likely to maintain its existing stance, making this a finely balanced policy review. YES Bank noted, “We anticipate the RBI will hold rates and stance unchanged in December.”
Despite headline retail inflation remaining below 2 per cent, and projected to stay subdued for the next few months, India’s economic momentum has surprised on the upside. GDP growth for Q2 FY26 stood at an impressive 8.2 per cent, supported by steady high-frequency indicators in October.
However, the report also pointed to softer readings in the Manufacturing PMI and IIP, suggesting early signs of moderation. Growth may face additional challenges in the coming quarters as festive demand tapers off and government capital expenditure slows.
YES Bank expects the RBI to revise its inflation projections downward in the upcoming policy. The FY26 inflation forecast could be reduced to 1.8–2.0 per cent from the existing 2.6 per cent.
The Q1 FY27 estimate may also be brought down to around 4 per cent, while YES Bank’s own forecast is even lower at 3.1 per cent. Although inflation is well below 2 per cent, typically a cue for a rate cut, the report believes conditions do not favour such a move right now.
The report outlines four strong reasons for the RBI to maintain status quo: the rollout of new CPI and GDP series in February 2026, current low inflation being driven mostly by vegetables and GST cuts, credit growth outpacing deposit growth, posing risks if deposit rates fall further, and weaker foreign inflows combined with pressure on the rupee, making a rate cut ill-timed.
Overall, holding rates and stance unchanged would preserve policy stability while giving the RBI greater flexibility ahead.
The MPC meeting is underway from December 3 to 5, with Governor Sanjay Malhotra scheduled to announce the final decision on December 5 at 10 AM.
(With Inputs From ANI)
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