The Reserve Bank of India (RBI) will hold its Monetary Policy Committee’s meeting on December 3-5, 2025, to decide on whether to enforce another interest rate cut, among other issues slated to be discussed.
Opinions are divided, as economists lean towards the possibility of the central bank trimming benchmark lending rate by 25 bps, since inflationary pressures are subdued in the backdrop of the consumer price index (CPI)-based headline retail inflation ruling below the 2 per cent-lower band mandated by the government for the last two months.
The government has mandated the RBI to ensure that retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
However, there are also experts also believe that a better-than-expected GDP growth of 8.2 per cent in the second quarter of this fiscal, targeted public investment, and various reforms, such as the GST rate cut, may prompt the apex bank to keep the rate unchanged when RBI Governor, Sanjay Malhotra, announces the decision of the rate-setting panel on December 5.
The RBI has so far cumulatively reduced the repo rate by 100 basis points in successive policy announcements since last year to 5.5 per cent, before hitting the pause button in August.
Dharmakirti Joshi, Chief Economist at ratings agency, Crisil, said the primary driver behind the headline inflation falling below the lower end of the RBI’s target range of 2-6 per cent has been food inflation, although fuel inflation has also remained subdued.
“We anticipate 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.
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A report by the HDFC Bank said the Indian economy’s story this year has been about growth overshooting and inflation undershooting.
“Therefore, the upcoming RBI rate decision remains a close call. But given the lingering risks on growth (in H2) and inflation expected to remain well below 4 per cent until Q3 FY27, we see that there may still be a chance of another 25bps rate cut at the upcoming policy,” it said.
Ashok Kapur, Chairman, Krishna Group and Krisumi Corporation, believes that with inflation hovering at record lows, the RBI has the policy space to consider a 25-bps rate cut.
“The housing and allied sectors, as well as the broader economy, are already benefiting from the GST rationalisation and the RBI’s cumulative 100-bps rate cuts earlier this year,” he said, adding that a further reduction at this juncture would undoubtedly strengthen the ongoing growth momentum.
Experts believe the guidance is expected to be neutral to dovish, providing an assurance of adequate liquidity and a hint at further scope for rate reduction with evolving growth dynamics.
Madan Sabnavis, Chief Economist at Bank of Baroda agrees it would be a close call on the repo rate.
“Given that monetary policy is forward-looking and inflation in Q4-FY26 and FY27 is likely to be in the 4 per cent plus region, yielding a real repo rate of 1-1.5 per cent, the policy rate appears to be at a fair level. Under these conditions, we do not think that there should be any change in the policy rate,” he said.
Mandar Pitale, Head-Financial Markets, SBM Bank (India), also expects the MPC to maintain the status quo in the December meeting of the 58th rate-setting panel.
“This is in light of the need to attract interest rate-sensitive flows to support the BoP and to avoid aggravating the immediate issue on resource mobilisation for banks, as a rate reduction could move retail resources away from the banking sector,” he said.
Aditi Nayar, Chief Economist, ICRA considers a rate cut in the December 2025 MPC review unlikely, given the Q2 FY26 GDP growth exceeding 8 per cent, notwithstanding the series-low CPI inflation print for October 2025.
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