India’s central bank is facing a difficult decision as it heads into its December 2025 MPC meeting. The economy is delivering strong growth while inflation has dropped to record-low levels, creating contrasting signals for monetary policy.
In a recent poll of economists, 12 out of 20 expect the RBI to cut its key policy rate by 25 basis points — bringing the repo rate down from 5.50 % to 5.25 %. On the other side, eight respondents (including some major institutions) believe the RBI may hold the rate steady, pointing to robust growth and potential risks ahead.
The strong case for a cut rests on the sharp fall in retail inflation — reportedly at multi-year lows — and softening price pressures, which have boosted the appeal of rate easing for borrowers.
However, recent data showing India’s economy grew at an annualised 8.2 % in Q2 FY2026 has complicated matters for policymakers. Such growth suggests overheating risk and reduces urgency for policy easing among some economists.
Analysts note that inflation forecasts for the full year remain modest, leaving the RBI some room for manoeuvre — but global uncertainties, external headwinds and impact of trade policies may also influence the final call.
In short, while the drop in inflation and stable liquidity makes a compelling case for a 25 bps rate cut, the strength in growth and macro-stability concerns mean the decision remains finely balanced. Markets and borrowers will watch closely when the RBI announces its decision.
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