RBI may cut interest rate by 25 bps on Friday

RBI May Trim Benchmark Lending Rate by 25 Bps in Upcoming Monetary Policy Meeting

The Reserve Bank of India (RBI) may trim the benchmark lending rate by 25 basis points (bps) in its forthcoming monetary policy meeting, as inflationary pressures are subdued.

Reasons for Rate Trim:

• Consumer price index (CPI)-based headline retail inflation has been ruling below the 2 per cent lower band mandated by the government for the last two months.
• Economic growth has picked up, sustained by fiscal consolidation, targeted public investment, and various reforms, such as the GST rate cut.

Expert Opinions:

• Madan Sabnavis, Chief Economist, Bank of Baroda: "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."
• Dharmakirti Joshi, Chief Economist, Crisil: "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."
• Aditi Nayar, Chief Economist, ICRA: "With the Q2 FY2026 GDP growth exceeding 8 per cent, a rate cut in the December 2025 MPC review now appears unlikely, notwithstanding the series-low CPI inflation print for October 2025."

Monetary Policy Committee Meeting:

The Monetary Policy Committee meeting is scheduled from December 3-5, 2025.

RBI Governor's Decision:

RBI Governor Sanjay Malhotra is scheduled to announce the decision of rate-setting panel on December 5.

Key Statistics:

• The consumer price index (CPI)-based headline retail inflation has been ruling below the 2 per cent lower band mandated by the government for the last two months.
• The GDP growth has reached 8.2 per cent in the second quarter.
• The cumulative reduction in the repo rate by the RBI is 100 basis points, reaching 5.5 per cent.