RBI Seen Cutting Repo Rate by 25 Bps to 5.25% on December 5: Majority of Economists Expect Stimulus Move

The Reserve Bank of India (RBI) is poised to lower its key policy rate by 25 basis points (bps) to 5.25% at its December 3-5 Monetary Policy Committee (MPC) meeting, according to a Reuters poll of 80 economists where 62 forecast the cut. Inflation has dipped sharply to 0.25% in October—the lowest in 13 years—due to food price declines and consumer tax cuts, giving the RBI the monetary space to ease rates and stimulate demand. The central bank has already reduced rates by 100 bps so far this year and held steady at 5.50% since August.

Despite this easing, the RBI is mindful of the rupee's recent weakness, which hit a fresh low near 89.49 against the US dollar, reflecting inflation differentials with advanced economies. The MPC is expected to weigh these external pressures while aiming for balanced growth. Most economists believe the repo rate will hold at 5.25% through 2026 barring unforeseen inflationary spikes.

Key Highlights:

RBI repo rate forecast to drop from 5.50% to 5.25% on Dec 5.

Inflation hits a historic low of 0.25% in October, easing price pressures.

CPI inflation forecast for FY26 revised down from 2.6%, expected to remain below 4%.

Rupee’s recent depreciation adds a layer of complexity to policy decisions.

Rate cut aims to boost sluggish consumption amid external risks like US tariffs.

Majority of 62 out of 80 economists in Reuters poll favor the cut, others expect no change.

RBI's rate cuts so far in 2025 total to 100 bps, starting from 5.75% in February.

Sources: Reuters, Hindustan Times, The Economic Times, Moneycontrol, Informist Media.