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RBI Monetary Policy: RBI cuts repo rate by 25 bps to 5.25% amid rupee slump
A majority of the 44 economists surveyed by Bloomberg expected an RBI repo rate cut by 25 bps to 5.25% but the rupee's slide had faded those expectations.
The Reserve Bank of India has cut the repo rate by 25 basis points to 5.25%, even as the monetary policy committee tries to balance India's record-low inflation against a plunging rupee and 8%-plus GDP growth rate.
A majority of the 44 economists surveyed by Bloomberg expected the RBI to cut its benchmark repurchase rate by a quarter point to 5.25% on Friday, given inflation is well below the 4% target. But with the Indian economy expanding at a faster clip and the rupee dropping to a record low below 90 to the dollar, there were plenty of reasons for the RBI to pause as well—as forecast by Citigroup Inc., Standard Charted Plc and State Bank of India.
RBI MPC Decisions Today
Here's a look at the key decisions taken by India's Monetary Policy Committee over their 3-5 December meeting:
- RBI cuts benchmark repurchase rate by 25 bps to 5.25%.
- RBI maintains a neutral monetary policy stance going ahead.
- RBI pegs India's GDP growth rate at 7.3% versus 6.8% earlier.
- RBI pegs India's inflation rate at 2% in FY26 versus 2.6% earlier.
After keeping the repo rate unchanged in the past two monetary policy meetings, RBI Governor Sanjay Malhotra opened the door to repo rate cuts last month, saying there was “definitely scope” for them to come down. Since then, however, official data showed that the Indian economy is proving resilient in the face of 50% US tariffs, while the rupee has plummeted.
As a result, the expectations of an RBI repo rate cut “appear to have faded,” and the central bank seems to be entering a phase of prolonged pause, said Soumya Kanti Ghosh, chief economic adviser at the State Bank of India and a member of the Prime Minister’s Economic Advisory Council.
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The rupee’s slide since the last MPC meeting made Friday’s decision more difficult to predict. The RBI has gone from vigorous defence of the currency to allowing it to breach 90 to the dollar this week amid uncertainty about a India-US trade deal.
