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New Delhi: The Reserve Bank of India (RBI) is likely to keep key policy interest rates unchanged in its monetary policy review this week following a better-than-expected GDP growth numbers even as inflation projections remain subdued due to GST rate rationalisation and good kharif harvest, analysts said.
The central bank’s rate setting panel Monetary Policy Committee (MPC) is scheduled to meet from December 3-5.
According to analysts the MPC faces a delicate decision due to favourable numbers on inflation as well as the economic growth front.
“While a rate cut was anticipated, strong growth alongside low inflation reduces the likelihood of one this quarter. The central bank may instead wait until February, when Q4 growth is expected to moderate, to recalibrate policy,” said Rumki Majumdar, Economist at Deloitte India.
The RBI has kept the key policy interest rates unchanged since August after lowering it by 100 basis points in the first half of 2025. While the majority of the analysts see no change in the policy rates, some argue that the central bank may opt for a 25 basis points cut considering the subdued inflation projections. The repo rate, or the interest at which the RBI lends money to the commercial banks, currently stands at 5.5%. It was last lowered in June.
“Expectations built till a few days back of a shallow rate cut of 25 bps appear to have faded as finer readings of the strong Q2 growth print and the evolving playbook make the choice tilted in favour of pause in December policy,” SBI Research said in a report.
Devendra Kumar Pant, Chief Economist, India Ratings and Research, said the RBI is likely to cut policy interest rates by 25-50 basis points in the current financial year.
“Strong real growth and weak nominal growth makes monetary policy decision difficult, while strong 8.0% growth in 1H FY26 does not support argument for monetary easing, however, weak inflation and nominal GDP growth in 1H FY26 much lower than the budgeted GDP growth makes a case for monetary easing,” Pant said.
India’s gross domestic product (GDP) growth jumped to a six-quarter high of 8.2% in July-September period, exceeding the RBI as well as other estimates by a wide margin, boosted by strong domestic demands, as per the National Statistics Office data released on Friday.
Normally, the central banks lower policy rates to boost consumption when the economic growth, especially demand is weak.
However, record low inflation gives RBI room to further boost consumption. The annual retail inflation fell to 0.25% in October, the lowest since the Consumer Price Index (CPI) data series was introduced in 2015.