The Reserve Bank of India’s bi-monthly Monetary Policy Committee meeting kicks off today. The 6-member committee’s decision on interest rates will be announced by the RBI Governor, Sanjay Malhotra, on December 5 at 10:00 AM.
While the central bank decided to keep the repo rate unchanged at 5.5 per cent in the last two MPC meetings, economists remain divided on whether the RBI will maintain its neutral stance or cut rates this time.
The primary reason for the split among economists is the strong GDP growth of 8.2% in Q2 FY26, alongside a multi-year record-low CPI inflation rate of 0.25% in Oct ’25.
“Both these developments are mutually opposing forces from an interest rate perspective. Central banks usually do not tend to cut interest rates during periods of strong economic activity, represented by GDP growth. At the same time, the central banks usually respond to a low inflationary environment by cutting interest rates”. Mehul Pandya, MD and Group CEO of CareEdge Ratings, explains.
Furthermore, here are the views of leading economists on why and what the Monetary Policy Committee will decide on interest rates on December 5.
Repo cut likely: Nuvama
Nuvama says that while Q2 real GDP growth was strong, the NGDP continues to remain sluggish, stuck below 9 per cent. Furthermore, the firm notes that the GST cut may boost consumption, but the expected slowdown in government spending in 2HFY26 could be an offsetting factor.
Nuvama states that, in light of the above factors and tariff impact, the low CPI inflation provides regulators with ample room for a rate cut in December.
Similarly, Crisil also expect a rate cut amid the US tariffs. “I would believe that given the volatile and uncertain global environment, a rate cut could be something like an insurance rate cut”, says Dharmakirti Joshi, Chief Economist at Crisil.
RBI to hold rates: Bank of Baroda
Aditi Gupta, economist at Bank of Baroda, says that strong growth and range-bound inflation are expected to provide the MPC space to keep rates steady as it navigates a challenging and uncertain external environment.
“The economy is expected to have maintained momentum in Q3 FY26 as well, supported by a recovery in urban consumption and resilient rural demand. Private investment is also witnessing signs of a recovery with a pickup in credit demand.” Gupta added.
Gupta adds that besides the rate decision, what would also be critical to watch out for is the RBI’s guidance/actions on the liquidity front, as easier liquidity conditions would be critical for transmission.