• Source:JND
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RBI Monetary Policy Meeting: The Reserve Bank of India has reduced the repo rate by 25 basis points to 5.25 per cent in its latest Monetary Policy Committee (MPC) meeting, chaired by Governor Sanjay Malhotra.

The announcement was made by Governor Malhotra in a press conference after a three-day MPC meeting. 

Earlier, the RBI had cut the repo rate by 100 basis points across three rounds this year. It was supported by falling inflation. The latest cut marks the fourth round of cuts in the repo rate this year.

During his address after the MPC meeting, Governor Malhotra said, "We look back at the year so far with satisfaction. The economy witnessed robust growth and benign inflation. Since the October policy, the Indian economy has witnessed rapid disinflation, with inflation dipping to a mere 0.3% in October 2025. Real GDP growth accelerated to 8.2% in Q2, aided by strong festive spending and rationalisation of GST rates. Inflation at a benign 2.2% and growth at 8% for the first half of the year presents a rare Goldilocks period."

On the falling rupee value, the RBI Governor said, "The MPC also decided to continue with a neutral stance. In view of evolving liquidity conditions, the Reserve Bank will conduct OMO purchases of government securities worth Rs 1 lakh crore and a three‑year rupee buy-sell swap of 5 billion US dollars this December to inject durable liquidity into the system. The MPC noted that headline inflation has eased significantly and is likely to remain softer than earlier projections."

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GDP growth forecast

The Governor said that the rate-setting body revised its growth forecast for FY26 upward to 7.3 per cent from 6.8 per cent. The quarterly growth forecasts are 7 per cent for Q3 FY26 and 6.5 per cent for Q4 FY26. For Q1 and Q2 of FY27, the growth forecasts are 6.7 per cent and 6.8 per cent, respectively.

Inflation forecast

The MPC has also revised its inflation forecast by cutting it by 0.6 per cent to 2 per cent. The quarterly inflation forecasts are 0.6 per cent for Q3 of FY26, 2.9 per cent for Q4 of FY26, 3.9 per cent for Q1 of FY27, and 4.0 per cent for Q2 of FY27.

A close call

As the inflation continued to ease and the latest GDP data showed a steady growth, it was highly expected that the central bank would further make cuts. However, the weakening Rupee against the Dollar had made it uncertain, and therefore, the repo rate cut was a close call.

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The experts had argued that the economic conditions are conducive to further cuts in the repo rate, but any such move could devalue the rupee further.

The rupee has recently nosedived to a record low, breaching 90 per USD, prompting concerns in the market despite resilient economic growth. So far, RBI has kept itself away from intervention and has stepped in only at select levels.

The three-day meeting, chaired by Governor Malhotra, started on December 3. In its report, domestic brokerage firm JM Financial had said, "We expect the RBI to raise its FY26 growth forecast by at least 20 basis points to 7% and reduce its inflation forecast by 40 basis points to 2.2%".

Similarly, YES Bank, in its report, had stated that the RBI is expected to keep the policy repo rate unchanged at 5.5 per cent and maintain its existing stance.

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