RBI monetary policy: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided unanimously to cut the repo rate by 25 basis points to 5.25%, maintaining a neutral stance. On Friday, December 5, Governor Sanjay Malhotra announced a 25-basis-point rate cut, highlighting record-low inflation.
The rate cut by the RBI MPC came as a surprise for many, as a majority of experts expected the central bank to maintain the status quo on rates in December. Nine out of 13 economists polled by Mint expected a pause in the repo rate, while four had anticipated a 25-basis point cut.
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RBI MPC Meeting: Key highlights
1. Repo rate falls to 5.25%
Governor Malhotra stated that the MPC unanimously decided to cut the repo rate by 25 basis points, citing inflation at a benign 2.2% and growth at 8% for the first half of this year, which presents a rare “Goldilocks” period.
2. Growth estimates revised upwards
The RBI revised its FY26 GDP growth estimates to 7.3% from 6.8% previously, with Q3FY26 estimates increased to 7% from 6.4%, Q4FY26 estimates raised to 6.5% from 6.2%, and Q1FY27 estimates increased to 6.7% from 6.4%. The central bank expects the Indian economy to grow at a rate of 6.8% in Q2FY27.
3. Inflation forecast revised downwards
The central bank cut FY26 CPI inflation forecast to 2% from 2.6% earlier, with Q3FY26 forecast cut to 0.6% from 1.8%, Q4FY26 forecast cut to 2.9% from 4%, and Q1FY27 estimates lowered to 3.9% from 4.5%. RBI expects retail inflation at 4% in Q2FY27.
(This is a developing story. Please check back for fresh updates.)
