The recently released minutes of the October policy meeting showed that the MPC unanimously decided to keep the repo rate unchanged at 5.5%, even as several members acknowledged there was room for monetary easing.
RBI Governor and external members had cited ongoing transmission of earlier cuts and uncertainty around global trade as reasons to wait before acting.
Dr. Nagesh Kumar, External Member of the MPC, said the Committee preferred to “wait for the transmission of the repo rate cuts in the past to be fully transmitted before we consider and look at other options and other actions.”
He noted that while inflation had fallen below forecasts, global trade developments and the impact on MSMEs warranted a cautious approach.
However, with inflation expected to average around 2.3 to 2.4%, well below the RBI’s projection of 2.6%,
several economists believe the central bank now has enough room to ease policy.
“This kind of very benign inflation outlook certainly opens up space for monetary policy action,” Kumar said, hinting that December could see a rate move.
Abhishek Upadhyay, Senior Economist at ICICI Securities Primary Dealership, noted that “December rate cut is more or less a done deal,” as both inflation and global growth signals have turned softer since the October review.
He added that markets have already priced in a 25-basis-point cut, though further easing will depend on how global trade tariffs evolve.
Echoing that view, Devang Shah, Head of Fixed Income at Axis Mutual Fund, said the bond market is “fully pricing in a 25-basis-point cut in December.”
According to him, communication from the RBI will be key, and a continued dovish tone could encourage expectations of another cut in early 2026 if growth momentum remains weak.
Bond yields have already responded positively, with the 30-year yield easing nearly 30 basis points from recent highs. Shah expects 10-year yields could move further down to around 6.35%, should the central bank deliver the December cut and maintain a supportive tone.
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