RBI's Upcoming Monetary Policy Meeting: Key Decisions Awaited

Reserve Bank of India's Monetary Policy Committee Meeting

New Delhi, Dec 3: The Reserve Bank of India (RBI) is gearing up for its Monetary Policy Committee (MPC) meeting starting Wednesday, with the crucial decision on the key policy rate expected on Friday.

This three-day meeting occurs against a backdrop of historically low inflation and a significant rise in GDP growth. The real GDP, adjusted for inflation, recorded an impressive growth of 8.2% in the second quarter of FY 2025-26, compared to 5.6% in the same quarter of the previous fiscal year.

October's inflation data showed a notable decline, highlighting the economy's strong fundamentals and effective price control strategies.

Experts in the market suggest that the decision regarding the repo rate will be closely contested during the RBI MPC.

Madan Sabnavis, Chief Economist at Bank of Baroda, indicated that since monetary policy is inherently forward-looking, and with inflation expected to hover around 4% in Q4-FY26 and FY27, the real repo rate is projected to be between 1% and 1.5%. He believes the current policy rate is reasonable and does not foresee any changes.

A report from SBI suggests that earlier expectations for a modest rate cut of 25 basis points by the RBI have diminished, as recent strong growth figures and evolving economic conditions favor a pause in December's policy. The report emphasizes the need for the RBI to adopt a 'calibrated easing' approach within a neutral stance through liquidity measures to manage yield impacts.

Nevertheless, with inflation anticipated to remain significantly below target in the near term, HSBC Global Investment Research forecasts a 25 basis point rate cut during the MPC meeting on December 5, potentially lowering the policy repo rate to 5.25%.