RBI May Slash Repo Rate in December 2025 – What It Means for You
The Reserve Bank of India (RBI) is reportedly set to cut the repo rate by 25 basis points in its December 2025 policy meet, potentially bringing it down to a comfy 5.25%.
Why now? Inflation surprises in the Consumer Price Index (CPI) have been lower than expected, giving the central bank room to ease up. But don’t expect fireworks just yet, RBI plans to play it safe with a “wait and watch” approach, carefully tracking how its trio of policy moves on rates, liquidity, and regulations actually impacts the economy. So, whether you’re a borrower hoping for cheaper loans or a saver keeping an eye on returns, keep your eyes peeled, December could bring some sweet surprises!
Fiscal Outlook
The government is expected to stick to a pragmatic fiscal approach, focusing on gradual consolidation while continuing to prioritise capital expenditure. Such measures are seen as crucial for supporting medium-term economic growth.
Inflation Outlook
Headline CPI is projected to rise slightly in 2026-27 from the low levels expected in 2025, eventually aligning with the RBI’s medium-term target of 4%.
Key Details on CPI
- Food prices may be partially influenced by a weak base.
- Core inflation is expected to remain stable.
- Both food and core CPI are projected to converge around 4–4.2% year-on-year, keeping inflation expectations anchored.
- Stable inflation is likely to support consumer sentiment.
External Sector Stability
Morgan Stanley expects India’s current account deficit to remain range-bound at or below 1 per cent, without significant widening. The report also highlighted the resilience of India’s external balance sheet, supported by healthy foreign exchange reserves, adequate import cover, and a low external debt-to-GDP ratio, ensuring sufficient macroeconomic stability.