RBI MPC Meeting December 2025: Governor Sanjay Malhotra Announces Repo Rate Cut by 25 Basis Points to 5.25%

The Reserve Bank of India (RBI) on Friday, December 5, 2025, reduced the policy interest rate by 25 basis points to 5.25 percent, citing the need to support economic growth amid global uncertainties. This is the first repo rate cut following two consecutive pauses in August and October, bringing cumulative rate reductions to 125 basis points in FY26.

The RBI's move is inline with GoodReturns exclusive poll of nearly 50 economists, which predicted accurately about the policy outcome.

RBI MPC Meeting December 2025: Governor Sanjay Malhotra Announces Repo Rate Cut by 25 Basis Points to 5.25%

Announcing the final bi-monthly monetary policy for the current fiscal year, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously voted to lower the repo rate from 5.5 percent to 5.25 percent with a neutral stance.

"This adjustment reflects the MPC's confidence in sustained disinflation, while maintaining a neutral policy stance to support robust economic momentum," Mr. Ashwani Dhanawat, Executive Director & Chief Investment Officer, Shriram General Insurance.

RBI Revises FY26 Inflation Forecast to 2.6%; Projects Gradual Rise in FY27

The RBI has projected inflation to average 2.6 percent in FY26, supported by easing food prices and improved supply conditions. It expects inflation to rise modestly to 4 percent in the fourth quarter of FY26 and further to 4.5 percent in the first quarter of FY27, reflecting a gradual normalisation in price pressures.

Notably, the central bank has revised its full-year FY26 inflation forecast downward to 2.6 percent, a sharp reduction from the 4.2 percent estimate made in February, signalling increased confidence in the inflation outlook.

RBI Retains FY26 GDP Growth Forecast at 6.8%; FY27 to Start at 6.4%

In its October review, the RBI retained its real GDP growth projection for 2025-26 at 6.8 percent. The quarterly breakdown shows growth expected to remain strong, with 7.8 percent in the first quarter and 7 percent in the second quarter.

As the year progresses, growth is projected to moderate slightly to 6.4 percent in the third quarter and 6.2 percent in the fourth quarter. Looking ahead, the RBI anticipates a rebound to 6.4 percent in the first quarter of FY27, signalling sustained economic stability.

Meanwhile, consumer inflation cooled sharply, with CPI falling to 0.25 percent in October, supported by record-low food prices and tax-related price relief.

However, some indicators point to emerging softness in economic activity. The Manufacturing Purchasing Managers' Index (PMI) slipped to 56.6 in November, down from 59.2 in October, marking the slowest improvement in operating conditions since February, according to data from S&P Global.

"The MPC has in a platter given what the market expected. A Rate cut alongside long dated Swaps and OMOs, not only keeps the liquidity promise intact, but also will keep the Currency in relative balance. The market appears to have reacted positively on all counts," said Lakshmanan V, Group President & Head - Treasury (treasurer), Federal Bank.