New Delhi, Oct 1 Global brokerage firm Morgan Stanley on Wednesday said that the Reserve Bank of India (RBI) could start reducing interest rates as early as December this year, with another cut expected in February 2026.
The report suggests that the repo rate, which currently stands at 5.50 per cent, may gradually come down to 5 per cent by the end of 2026.
According to Morgan Stanley, easing inflationary pressures and the need to support economic growth will give the central bank room to reduce policy rates.
The brokerage noted that India’s consumer price inflation has been trending lower, while global crude oil prices and food prices have shown signs of stability.
This, it said, increases the possibility of the RBI adopting a more accommodative monetary stance.
The report added that a rate cut cycle, beginning with small reductions in December 2025 and February 2026, will help lower borrowing costs for households and businesses.
“This is expected to support consumption, boost investment activity, and provide further momentum to India’s growth story,” the report said.
Morgan Stanley also highlighted that the RBI will keep a close watch on global economic conditions, especially US interest rate movements and commodity price trends, before finalising the pace of its rate cuts.
“If the repo rate does come down to 5 per cent as projected, it would mark the lowest policy rate in recent years, giving a significant push to credit demand in sectors such as housing, automobiles, and infrastructure,” Morgan Stanley added.
RBI kept the repo rate unchanged at 5.5 per cent and maintained its neutral stance in the latest monetary policy review on October 1.
The Monetary Policy Committee (MPC) voted unanimously to hold rates steady for the second consecutive meeting.
While this was broadly in line with market expectations, analysts noted that the current environment of soft inflation and weaker nominal growth creates space for easing.
Two members of the MPC even suggested shifting the stance from neutral to accommodative, signalling room for rate cuts in the coming months.
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