RBI Governor to Announce Policy Rate Today; Experts Split As Economists Expect Pause, Industry Eyes Cut

Mumbai (Maharashtra) [India], December 5 : The Reserve Bank of India (RBI) Governor Sanjay Malhotra will announce the policy rate today at 10 am as the three-day Monetary Policy Committee (MPC) meeting concludes on Friday.

The financial markets remain divided on expectations from the MPC, with economists largely anticipating a pause in rate action, while some industry voices believe the time is right for a rate cut.

Economists expect that the central bank may continue its current stance, supported by strong economic indicators.

The robust GDP growth of 8.2 per cent and low inflation levels may allow the RBI to hold the policy rate steady at 5.5 per cent. The contrasting macroeconomic signals have sparked debate on the direction of the monetary policy.

Speaking to ANI, Mehul Pandya, MD and Group CEO of CareEdge Ratings, said both strong GDP growth and multi-year low inflation present opposing signals for interest rate decisions.

He stated, "Both these developments (of a continued strong GDP growth and multi-year low inflationary levels) are mutually opposing forces from an interest rate perspective. Central banks usually do not tend to cut interest rates during periods of strong economic activity, represented by GDP growth. At the same time, the central banks usually respond to a low inflationary environment by cutting interest rates."

A report by Bank of Baroda also expects interest rates to remain unchanged. The report said that the Reserve Bank of India (RBI) is expected to maintain the repo rate at 5.50 per cent in its upcoming monetary policy announcement on Friday. It added that the central bank is likely to retain its current neutral stance as well.

The report stated, "We expect the RBI to keep the repo rate steady at 5.50 per cent in its Dec'25. The stance is also expected to be maintained at neutral."

However, some industry leaders see room for a rate cut as inflation continues to ease.

Rohit Arora, CEO and Co-Founder of Biz2X and Biz2Credit, believes the current situation strengthens the case for a 25-basis point reduction in the policy rate. He added that easing inflation and market expectations point towards an opportunity for the RBI to adopt a more supportive policy direction.

Arora said, "With inflation continuing to ease and financial markets increasingly pricing in a 25-basis point reduction, the upcoming policy review presents a strong opportunity for the RBI to adopt a more supportive stance."

In the last monetary policy held on October 1, the RBI maintained the repo rate at 5.5 per cent.

In a unanimous decision, the Monetary Policy Committee kept the policy repo rate unchanged. The governor had informed that the MPC met on September 29 and 30, and October 1, to discuss the economic conditions and decide the interest rate trajectory.

After a detailed assessment, the committee voted unanimously to maintain the rate at 5.5 per cent.

With this decision, the Standing Deposit Facility (SDF) rate also remained unchanged at 5.25 per cent, while the Marginal Standing Facility (MSF) rate and the Bank Rate continued to stand at 5.75 per cent.

The Standing Deposit Facility (SDF) rate refers to the interest rate the RBI pays to banks that deposit their surplus, uncollateralized funds with the central bank on an overnight basis.

The announcement today will determine whether the central bank moves towards policy easing or continues to prioritise stability amid strong growth momentum.

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