Will RBI Implement Another Repo Rate Cut in December's MPC Review?
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Synopsis
Economists anticipate a potential repo rate cut from RBI in December's MPC review, as CPI inflation hits a historic low. This could impact future monetary policies significantly. Stay informed about the implications of these economic shifts.
Key Takeaways
- RBI expected to cut repo rate again.
- Current CPI inflation at 0.3%.
- Factors include lower food prices and GST benefits.
- Potential impact on consumer borrowing costs.
- Economic forecasts indicate further easing.
New Delhi, Nov 13 (NationPress) Economists are predicting that the Reserve Bank of India (RBI) will likely introduce at least one more repo rate cut during its monetary policy committee (MPC) meeting in December. This anticipation comes as inflation, measured by the Consumer Price Index (CPI), has decreased to 0.3 percent year-on-year in October, down from 1.4 percent in September, representing the lowest figure since the 2011-12 base series.
The decline is attributed to ongoing deflation in the food and beverages sector, along with a slight reduction in core inflation.
“Given the unexpected drop in food inflation, favorable expectations for food supplies for the remainder of the fiscal year, stable global crude oil prices, and benefits from GST rate cuts on widely consumed items, we project that CPI inflation will average 2.5 percent this fiscal year, significantly lower than last year’s 4.6 percent,” noted Crisil in its report.
Many key categories affected by GST did not fully reflect the changes in October, suggesting potential further impacts in November.
The November CPI is currently estimated at 0.9 percent, influenced by GST adjustments, with the FY26E headline CPI now predicted to be less than 2 percent, indicating a possible downside of 50 basis points to the RBI’s forecast of 2.6 percent.
“This situation could bolster the argument for a rate cut in December, and potentially beyond, depending on how tariff conditions develop. We emphasize that the RBI’s focus on one-year-ahead inflation forecasts (RBI: 4 percent+) appears increasingly misplaced in this rapidly changing scenario,” stated Emkay Global Financial Services in their analysis.
Aditi Nayar, Chief Economist at ICRA, indicated that the RBI’s MPC is expected to further reduce its CPI inflation forecast for FY2026 from the previously stated 2.6 percent, driven by a soft sequential trend in food prices and the effects of GST rate adjustments on various CPI components.
She mentioned that this, along with a dovish tone in the October policy document, would likely support a 25 basis points rate cut in the December 2025 policy review, unless there is an unexpected upside in Q2 FY26 GDP growth.
Point of View
The Reserve Bank of India’s decisions on interest rates are crucial. Our analysis shows that the anticipated repo rate cut aligns with current inflation trends, reinforcing our commitment to keeping the public informed on vital economic issues.
NationPress
13/11/2025
Frequently Asked Questions
What is the current CPI inflation rate?
The current CPI inflation rate is 0.3 percent year-on-year as of October.
When is the RBI's next MPC meeting scheduled?
The next RBI MPC meeting is scheduled for December.
What factors are influencing the predicted repo rate cut?
Factors include lower food inflation, stable global crude prices, and expected benefits from GST rate cuts.
How does the current inflation rate compare to last year?
The current inflation rate of 0.3 percent is significantly lower than last year's rate of 4.6 percent.
What could this mean for consumers?
A repo rate cut could lead to lower borrowing costs, impacting loans and mortgages positively for consumers.
