The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points to 5.25%—its first rate reduction in six months—to support high growth while keeping inflation low. The decision was taken unanimously by the Monetary Policy Committee (MPC) during its meeting from December 3–5. The policy stance remains neutral.
Key MPC Announcements
- Repo rate reduced by 25 bps to 5.25%
- Monetary stance remains neutral
- India’s GDP growth forecast raised to 7.3% (from 6.8%)
- Inflation estimate for FY26 lowered to 2% (from 2.6%)
- RBI to conduct ₹1 lakh crore OMO purchases soon
- RBI to carry out a $5 billion dollar-rupee swap in December
Governor Sanjay Malhotra said India is in a “rare Goldilocks period” marked by strong growth and low inflation. He added that the favourable inflation outlook gives the RBI room to support growth even amid global challenges.
Economists had widely expected a 25 bps cut as inflation stays below the 4% target. However, factors like the rupee touching a record low and stronger-than-expected economic expansion also made a pause possible.
Following the announcement, the rupee firmed slightly to 89.7750 per dollar, and 10-year bond yields fell to 6.46%.
Some analysts believe this may be the last rate cut for now, saying the RBI is likely to rely more on liquidity measures going forward.