New Delhi [India], December 6 : An extended pause on policy rates is expected going ahead unless India's economic growth materially undershoots the projections, rating agency ICRA has asserted in a report, as the Reserve Bank of India (RBI) in an unprecedented move reduced repo rate when both GDP and inflation are congenial.
ICRA expects the rate cut cycle to have come to an end.
"Any further rate easing would only be likely if there is a material downward undershooting in growth outcomes, which leads to a cut in growth projections," the ICRA report read. "While the tone of the policy document was benign, we believe that today's rate cut is the final one in the current easing cycle."
In ICRA's view, the downward revision in the MPC's quarterly CPI inflation projections is largely along expected lines.
However, some of the decline in inflation in October 2025 has stemmed from tax policy changes, owing to the GST rate cuts across several items in the CPI basket, which has led to the cooling in the core-CPI excluding gold in that month (and not weaker demand).
"The favourable impact of the tax cuts is expected to exert some downward pressure on the CPI inflation prints until Q2 FY2027," the rating agency said.
The RBI has reduced inflation projection for 2025-26 to 2.0 per cent from the October estimate of 2.6 per cent and February estimate of 4.2 per cent.
RBI has also revised real GDP growth for 2025-26 and is projected at 7.3 per cent now.
Additionally, the RBI has decided to infuse durable liquidity in December 2025 via open market operation (OMO) purchase of G-secs (amounting to Rs. 1.0 trillion) and $5 billion USD/INR 3Y buy-sell swap auction
"This is expected to augur well for transmission as well as G-sec yields," the rating agency said.
RBI Governor Sanjay Malhotra on Friday characterised India's current macroeconomic moment as a "rare goldilocks period", which currently marks high economic growth and exceptionally low inflation. "The economy witnessed robust growth and benign inflation...We approach the new year with hope, vigour and determination to further support the economy and accelerate progress," the central bank governor said.
The remarks came as the Reserve Bank announced its latest monetary policy decision, cutting the repo rate by 25 basis points to 5.25 per cent, after the three-day review meeting.
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