Why the RBI MPC is likely to maintain status quo for a third consecutive time

Reserve Bank of India (RBI) Monetary Policy Decision

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is set to announce its decision on December 5, with economists expecting a neutral policy stance and a stable repo rate.

Key Policy Rate Likely to Remain Steady

• The six-member MPC is expected to maintain the repo rate at 5.5 per cent for the third successive policy.
• Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India, says that expectations of a shallow rate cut have faded due to strong Q2 growth and evolving economic conditions.
• Anubhuti Sahay, Head, India Economic Research, Standard Chartered Bank, expects a status quo on rates and stance due to limited need to deliver a cut with a 7 per cent GDP growth.

Headline CPI Inflation Moderates

Headline CPI inflation moderated to 0.3 per cent in October 2025 from 1.4 per cent in September, driven by deepening deflation in food prices and impact of GST rate cut.

Will There Be a Change in MPC Policy Stance?

• Economists expect the MPC to retain the 'neutral' monetary policy stance, allowing the rate to move in either direction depending on evolving economic data.
• The policy stance changed to neutral from accommodative in the June 2025 policy.

Revisions to GDP and Inflation Projections

• Economists expect the RBI to revise FY26 inflation projection lower and GDP forecast upwards in the forthcoming policy.
• Madan Sabnavis, Chief Economist, Bank of Baroda, expects a downward revision in inflation forecast by 0.1-0.2 per cent and an upward revision in GDP forecast of 0.1-0.2 per cent for FY26.
• Standard Chartered Bank's Sahay expects GDP and inflation to be revised higher towards 7.5 per cent and 2 per cent, respectively.

Liquidity Measures

Analysts expect RBI to announce open market operations (OMOs) to provide liquidity in the banking system.

Impact on Lending Rates

If the RBI retains the repo rate at 5.5 per cent, interest rates on loans and deposits are likely to remain unchanged. However, lenders may revise their interest rates on loans linked to the marginal cost of fund-based lending rate (MCLR).

Strong Q2 Growth and Evolving Economic Conditions

The country's GDP expanded at an impressive 8.2 per cent in the July-September 2025 quarter, driven by strong growth in Q1 FY26 and H1 growth of 8 per cent.

Key Quotes

• "Expectations built till a few days back of a shallow rate cut of 25 bps appear to have faded as finer readings of the strong Q2 growth print and the evolving playbook make the choice tilted in favour of a pause in December policy." - Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.
• "We expect a status quo on rates and stance in the December MPC as the need to deliver a cut with a 7 per cent GDP growth and front loading of rate cuts is limited." - Anubhuti Sahay, Head, India Economic Research, Standard Chartered Bank.