The Reserve Bank of India on Friday delivered its sixth rate cut of the year, trimming the repo rate by 25 basis points despite stronger-than-expected GDP numbers. The move signals the central bank’s confidence in India’s “rare goldilocks moment”, where inflation has collapsed even as growth remains robust.
The decision comes on the back of record-low retail inflation and a benign price outlook, giving policymakers ample room to keep monetary conditions supportive into 2026.
The six-member Monetary Policy Committee voted unanimously to reduce the repo rate to 5.25 percent, extending a cumulative 125-basis-point easing cycle that began in February 2025. Rates had been held steady in August and October.
RBI Governor Sanjay Malhotra said the economy had seen “rapid disinflation” since October, slipping below the lower end of the central bank’s tolerance band, even as momentum in domestic demand stayed strong. “The Indian economy is in a rare goldilocks phase,” he said in a video address.
To strengthen liquidity and ensure smoother transmission of lower rates, the RBI also announced open market purchases worth ₹1 trillion and $5 billion in forex swaps. Both measures are intended to ease money-market conditions and anchor borrowing costs across the financial system.
Most economists had expected, ahead of last week’s GDP release, a 25-basis-point cut, followed by a prolonged pause through 2026. But some traders had dialled back expectations after India posted an 8.2 percent expansion in the July–September quarter — the fastest among major economies.
Still, inflation proved decisive. Retail prices fell to an unprecedented 0.25 percent in October and are expected to remain soft in the coming months, reinforcing the MPC’s decision to maintain a ‘neutral’ stance while ensuring adequate support for growth.
