RBI's MPC begins deliberations, to take call on key interest rate on Fri

While growth remains robust, a significant decline in retail inflation in October has created additional room for this adjustment, Crisil Chief Economist Dharmakirti Joshi said.Even the RBI Governor last month had said that there is scope to further reduce policy interest rates.The consumer price index CPI based headline retail inflation is ruling below the 2 per cent lower band mandated by the government for the last two months.

The Reserve Bank's Monetary Policy Committee commenced its three-day deliberations amid expectations of 25 basis point rate cut, but some experts believe that the central bank may settle for status quo.

The decision of the RBI Governor Sanjay Malhotra-headed six-member rate-setting panel will be announced on Friday. The meeting is taking place against the backdrop of falling inflation, rising GDP growth, rupee crossing 90 against dollar and ongoing geopolitical tensions.

The RBI reduced the key short-term lending rate (repo) by 100 basis points in three tranches, beginning in February, amid declining consumer price index (CPI) based inflation.

''We anticipate a 25-basis point cut in the repo rate in December. While growth remains robust, a significant decline in retail inflation in October has created additional room for this adjustment,'' Crisil Chief Economist Dharmakirti Joshi said.

Even the RBI Governor last month had said that there is scope to further reduce policy interest rates.

The consumer price index (CPI) based headline retail inflation is ruling below the 2 per cent lower band mandated by the government for the last two months. Besides, the Indian economy has clocked better-than-expected GDP growth of 8.2 per cent in the second quarter.

In this backdrop, some experts believe that the RBI may continue with the pause on interest rates as economic growth has picked up, sustained by fiscal consolidation, targeted public investment, and various reforms, such as the GST rate cut.

RBI's MPC is likely to keep the repo rate unchanged at 5.50 per cent and maintain a neutral stance in the December 2025 meeting, Bank of Baroda Economist Aditi Gupta said.

Strong GDP growth and easing inflation give RBI room to pause rates as it monitors global uncertainties, she said.

The government has mandated the RBI to ensure that retail inflation remains at 4 per cent with a margin of 2 per cent on either side.

RBI is expected to revise upward its GDP growth forecast given better than expected first half numbers. Earlier in October, the Reserve Bank of India had upped the GDP forecast to 6.8 per cent from the earlier projection of 6.5 per cent for the current financial year.

With an 8 per cent growth rate in the first half, India may exceed the annual growth target of 6.3-6.8 per cent for FY26 as projected in the Economic Survey in January this year.

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