RBI Governor Signals More Room for Rate Cuts; Says Timing Lies With MPC The RBI will be meeting for its monetary policy meeting ( MPC) going forward in December 2025.
By Rajat Mishra
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Reserve Bank of India (RBI) Governor Sanjay Malhotra has reaffirmed that there is space for further monetary easing, but stressed that the timing of any policy rate cut will be determined by the central bank's Monetary Policy Committee (MPC). The RBI will be meeting for its monetary policy meeting ( MPC) going forward in December 2025. All eyes will be whether the apex bank will go for a rate cut. And the RBI governor has already hinted at the possibility of cutting the rate as inflation has hit its lowest level in recent times.
Malhotra said, "At the last MPC meeting in October, it was communicated clearly that there is room to cut policy rates. Since then, the macro-economic data we have received has not indicated that the room to lower rates has decreased."
He added that while the case for easing has strengthened, it is up to the MPC "to decide on rates in the coming policy."
"I am quite torn. I think a rate cut could have happened earlier, but as we go closer toward FY27, I think it's going to be more and more difficult to cut rates. So I am really on the fence for December," Aditi Nayar of ICRA said.
Inflation at Record Low Strengthens Case for Easing
The RBI has cut the benchmark repo rate by 100 basis points in the first half of 2025 but has held rates steady since August. Minutes of the October meeting showed several MPC members hinting at scope for future cuts, citing a more benign inflation outlook.
"Considering the moderated inflation, the apex bank will be in a comfortable position to cut rates in December MPC, but it will be a close call, as the growth numbers coming in the month of November will be around 7 per cent," an independent economist claiming anonymity said.
India's retail inflation fell to 0.25% in October, the lowest since the current CPI series began in 2012, driven by steep declines in food prices and tax cuts on consumer goods. Economists say inflation may now undershoot the RBI's projection of 2.6% for FY26 and remain well below the 4% target.
Bond markets reacted immediately to Malhotra's remarks. India's 10-year benchmark yield eased, slipping four basis points to 6.48%, while overnight indexed swaps, a key indicator of rate expectations, continued to price in a status quo for December despite broad expectations of a cut.
Rupee Slide 'Natural', Says Governor
Addressing concerns over the rupee's recent weakness, Malhotra said the currency's decline was in line with long-term trends.
A 3- 3.5% annual depreciation is typical for the rupee given India's inflation differential with advanced economies, he said, adding that the central bank intervenes only to curb "excessive volatility" rather than defend specific levels.
The rupee hit a new record low of 89.49 on Friday amid portfolio outflows and concerns over trade tensions with the U.S. It has fallen more than 4% this year, making it one of Asia's worst-performing currencies.
Eyes on December 5 Policy Review
With inflation at multi-year lows, growth holding steady, and financial markets increasingly pricing in a shift, attention now turns to the RBI's December 5 policy meeting. While many economists expect a rate cut, Malhotra reiterated that the final call rests with the MPC.
"The latest macro indicators reinforce the belief that there is definitely scope," he said. "Whether the MPC uses that room in December is for the committee to decide."
