RBI monetary policy: MPC cuts repo rate by 25 bps to 5.25% to keep Indian economy in the Goldilocks zone

The Reserve Bank of India has lowered its benchmark repurchase rate for the first time in six months, in an attempt to keep the Indian economy in the so-called "Goldilocks zone" of high growth and low inflation.
The RBI's six-member Monetary Policy Committee (MPC), which met over 3-5 December, voted unanimously to reduce the repo rate by 25 basis points to 5.25%, Governor Sanjay Malhotra said during his televised speech on Friday. The policy stance was retained at neutral.
One basis point is one-hundredth of a percentage point.
RBI MPC Decisions Today
Here's a quick look at the key decisions taken by India's Monetary Policy Committee over their 3-5 December meeting:
RBI cuts benchmark repurchase rate by 25 bps to 5.25%.
RBI maintains a neutral monetary policy stance going ahead.
RBI pegs India's GDP growth rate at 7.3% versus 6.8% earlier.
RBI pegs India's inflation rate at 2% in FY26 versus 2.6% earlier.
RBI to conduct ₹1 lakh crore OMO purchases in the near-term.
RBI to conduct $5 billion dollar-rupee swap in December.
Malhotra said low inflation and strong economic growth mean India was in a “rare Goldilocks period”.
“Despite an unfavourable and challenging external environment, the Indian economy has shown remarkable resilience,” the governor said. “The headroom provided by the inflation outlook has allowed us to remain growth supportive.”
A majority of the 44 economists surveyed by Bloomberg expected the RBI to cut repo rate by a quarter point to 5.25% on Friday, given that India's inflation rate is well below the 4% target. But with the Indian economy expanding at a faster clip and the rupee dropping to a record low below 90 to the dollar, there were plenty of reasons for the RBI to pause as well.
The rupee held onto gains after the rate announcement, and rose 0.2% to 89.7750 against the dollar. India’s sovereign 10-year bonds gained, with the yields falling 6 basis points to 6.46%.
After keeping the repo rate unchanged in the past two monetary policy meetings, RBI Governor Sanjay Malhotra opened the door to repo rate cuts last month, saying there was “definitely scope” for them to come down. Since then, however, official data showed that the Indian economy is proving resilient in the face of 50% US tariffs, while the rupee has plummeted.
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Dhiraj Nim, an economist at Australia & New Zealand Banking Group, said the RBI rate cut should not undermine the currency too much, since the US Federal Reserve is expected to ease in December, which would preserve the interest rate differential between the two markets.
“We believe this could be the last rate cut,” he said. “From here on, the RBI will mostly support via liquidity.”