RBI December MPC: Will the central bank deliver a final 2025 rate cut or hit pause on policy?
The Reserve Bank of India will announce its bi-monthly monetary policy today, following the MPC’s three-day meeting that started on Wednesday. The decision arrives at a time of cooling inflation, solid economic momentum, a rupee that has crossed 90 against the dollar, and elevated geopolitical tensions.
- Dec 5, 2025,
- Updated Dec 5, 2025 8:33 AM IST
Reserve Bank of India (RBI) Governor Sanjay Malhotra will announce the outcome of the Monetary Policy Committee’s (MPC) December meeting on Friday, followed by a press briefing at noon. Markets head into the policy with expectations finely balanced, as the central bank weighs resilient domestic growth against softening inflation and a weakening rupee.
What’s on the table this time?
The December policy is shaping up to be one of the more complex decisions of the year. On one hand, India’s second-quarter growth print has exceeded expectations, prompting questions on whether a rate cut is necessary. On the other hand, inflation has remained within a comfortable band for several months, giving the RBI room to ease if needed. The rupee’s recent decline, however, has injected uncertainty into the equation, potentially discouraging aggressive monetary loosening.
Some analysts expect the central bank to hold steady in its December 5 policy review. “We see the RBI maintaining a pause this month, with no change to rates or stance. The room for further easing is narrow,” Yes Bank Ecologue said in a note.
A CNBC-TV18 poll reflects this divided backdrop. About 60% of economists expect the MPC to deliver a modest 25-basis-point rate cut, taking the repo rate to 5.25%. The remaining 40% believe the committee will opt for a pause and keep borrowing costs unchanged at 5.50%.
Even among those anticipating a cut, the consensus suggests that the easing cycle may be nearing its end. Nearly 60% of respondents believe December would mark the final move in this round, 30% see a marginal chance of another cut in February, and 10% think the cycle has already concluded.
Economists also appear aligned on where the policy rate could eventually settle. A terminal rate of 5.25% is the favoured view, supported by a majority in the poll. Another 30% expect the central bank to halt at 5.50%, while only 10% foresee policy rates drifting down to 5%.
Growth and inflation expectations
Despite global uncertainty, the domestic growth outlook remains robust. With India clocking an average expansion of around 8% in the first half of FY26, half of the economists surveyed expect the RBI to raise its full-year GDP projection to 7.1–7.2%, while 40% see the estimate moving even higher, above 7.3%.
This optimism is accompanied by confidence on the inflation front. A striking 90% of respondents expect the RBI to revise its FY26 CPI inflation outlook lower, into the 2–2.5% range, underscoring the prevailing comfort around price stability.
Even if a rate cut materialises, most economists do not expect a shift in stance. The MPC is widely seen maintaining a neutral posture, though communication may soften to reflect the benign inflation environment.
A look back: October MPC meeting
At its October review, the MPC unanimously voted to keep the repo rate steady at 5.50% and maintained the stance at ‘neutral’, a position it adopted in June after moving away from an accommodative framework.
Growth projections were revised sharply upward to 6.8% for FY26, from 6.5% earlier, while the inflation forecast was lowered to 2.6%.
Key policy measures from October included:
Repo rate at 5.50%; SDF at 5.25%; MSF and Bank Rate at 5.75%; CRR at 3%
GDP estimates: Q2FY26 raised to 7%, Q3 at 6.4%, Q4 at 6.2%, and Q1FY27 at 6.4%
CPI inflation: Q2FY26 and Q3 at 1.8%, Q4 at 4%, and Q1FY27 at 4.5%
As the December verdict approaches, markets will watch closely for the RBI’s interpretation of the growth-inflation balance—and how it navigates a currency under pressure while keeping policy aligned with domestic economic realities.
Reserve Bank of India (RBI) Governor Sanjay Malhotra will announce the outcome of the Monetary Policy Committee’s (MPC) December meeting on Friday, followed by a press briefing at noon. Markets head into the policy with expectations finely balanced, as the central bank weighs resilient domestic growth against softening inflation and a weakening rupee.
What’s on the table this time?
The December policy is shaping up to be one of the more complex decisions of the year. On one hand, India’s second-quarter growth print has exceeded expectations, prompting questions on whether a rate cut is necessary. On the other hand, inflation has remained within a comfortable band for several months, giving the RBI room to ease if needed. The rupee’s recent decline, however, has injected uncertainty into the equation, potentially discouraging aggressive monetary loosening.
Some analysts expect the central bank to hold steady in its December 5 policy review. “We see the RBI maintaining a pause this month, with no change to rates or stance. The room for further easing is narrow,” Yes Bank Ecologue said in a note.
A CNBC-TV18 poll reflects this divided backdrop. About 60% of economists expect the MPC to deliver a modest 25-basis-point rate cut, taking the repo rate to 5.25%. The remaining 40% believe the committee will opt for a pause and keep borrowing costs unchanged at 5.50%.
Even among those anticipating a cut, the consensus suggests that the easing cycle may be nearing its end. Nearly 60% of respondents believe December would mark the final move in this round, 30% see a marginal chance of another cut in February, and 10% think the cycle has already concluded.
Economists also appear aligned on where the policy rate could eventually settle. A terminal rate of 5.25% is the favoured view, supported by a majority in the poll. Another 30% expect the central bank to halt at 5.50%, while only 10% foresee policy rates drifting down to 5%.
Growth and inflation expectations
Despite global uncertainty, the domestic growth outlook remains robust. With India clocking an average expansion of around 8% in the first half of FY26, half of the economists surveyed expect the RBI to raise its full-year GDP projection to 7.1–7.2%, while 40% see the estimate moving even higher, above 7.3%.
This optimism is accompanied by confidence on the inflation front. A striking 90% of respondents expect the RBI to revise its FY26 CPI inflation outlook lower, into the 2–2.5% range, underscoring the prevailing comfort around price stability.
Even if a rate cut materialises, most economists do not expect a shift in stance. The MPC is widely seen maintaining a neutral posture, though communication may soften to reflect the benign inflation environment.
A look back: October MPC meeting
At its October review, the MPC unanimously voted to keep the repo rate steady at 5.50% and maintained the stance at ‘neutral’, a position it adopted in June after moving away from an accommodative framework.
Growth projections were revised sharply upward to 6.8% for FY26, from 6.5% earlier, while the inflation forecast was lowered to 2.6%.
Key policy measures from October included:
Repo rate at 5.50%; SDF at 5.25%; MSF and Bank Rate at 5.75%; CRR at 3%
GDP estimates: Q2FY26 raised to 7%, Q3 at 6.4%, Q4 at 6.2%, and Q1FY27 at 6.4%
CPI inflation: Q2FY26 and Q3 at 1.8%, Q4 at 4%, and Q1FY27 at 4.5%
As the December verdict approaches, markets will watch closely for the RBI’s interpretation of the growth-inflation balance—and how it navigates a currency under pressure while keeping policy aligned with domestic economic realities.