Will RBI ease rates further or hold steady? Top economists weigh in ahead of RBI MPC Meet on Dec 3-5

The Reserve Bank of India’s monetary policy committee will meet from December 3 – 5 for the fifth time in FY26. The policy outcome will be closely watched as the central bank weighs strong growth momentum— with Q2 GDP rising to 8% against record-low inflation in October amid global uncertainty. RBI’s MPC has already lowered the benchmark rate by 100 basis points in the first half of 2025. However, it has held the rate steady since August. The pause was intended to help assess the impact of earlier easing on demand, liquidity and credit markets. According to Reuters, RBI Governor Sanjay Malhotra said in an interview with Zee Business last week that there is scope to further reduce policy interest rates, but the timing of such a move would depend on the committee. RBI MPC meet preview: Motilal Oswal sees limited scope for rate cuts Motilal Oswal Financial Services said in its report that India’s strong FY26 growth outlook limits chances of near-term rate cuts. “With a strong GDP growth print in Q2, the possibility of a rate cut looks limited. But what remains to be seen is if the consumption-led pickup witnessed during Oct–Nov fizzles out in Q4. The global tariff situation also remains a key monitorable.” Real GDP rose to 8% in H1FY26, compared to 6.1% growth in 1HFY25. Inflation, however, inflation hit a record low of 0.25% YoY in October. Motilal Oswal also believes headline inflation may fall well below RBI’s own projections. “Technically, inflation would be way lower than the RBI’s forecast of 2.6%. The possibility of headline inflation below 2% for FY26 remains quite high. This implies there is policy space for the last insurance rate cut. “The RBI should utilize the policy space and close the final loop. If the US-led tariff uncertainty lingers for longer than anticipated, the adverse impact would be far greater,” the report noted. RBI MPC meet preview: Repo rate at fair level, OMOs may be needed, says BoB Madan Sabnavis, Chief Economist, Bank of Baroda, said the repo rate decision will be a close call this time. However, he noted, “Given that monetary policy is forward looking and inflation in Q4-FY26 and FY27 is likely to be in the 4% plus region, yielding a real repo rate of 1–1.5%, 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 added, “However, as liquidity, though in surplus, is at the lower end of the 1% of NDTL mark, there could be a case for announcing some OMOs. This will be helpful during December when the advance tax payments flow out of the system.” “On the forecasts side, we do expect downward revision in inflation forecast by 0.1–0.2% and an upward revision in GDP forecast of 0.1–0.2% for FY26.” RBI MPC meet preview: Record-low inflation complicates decision, says DBS Radhika Rao of DBS said record-low inflation complicates the MPC’s decision. “We expect an emphasis on forward-looking growth guidance and high real rate buffer due to weak inflation, to justify a move to lower rates further,” she noted.