The Reserve Bank of India's Monetary Policy Committee is widely anticipated to keep benchmark interest rates unchanged in its upcoming December meeting, according to a recent analysis by the State Bank of India. This expectation for a pause follows the release of surprisingly strong economic growth figures and a continued downtrend in inflation, which have significantly altered the macroeconomic landscape.
Strong Data Tilts Scale Towards a Pause
The SBI report notes that earlier market whispers of a possible 25 basis point rate cut have now largely faded. The bank's economists believe the choice is now "tilted in favour of a pause" when the committee meets. This shift in outlook is directly attributed to India's impressive second-quarter GDP growth, which surged to a six-quarter high of 8.2% for Q2FY26. Compounding this robust growth is the dramatic fall in consumer prices, with retail inflation plunging to a historic low of 0.25% in October.
The RBI MPC has already held the repo rate steady in its last two consecutive meetings in August and October. This followed a 50 basis point reduction implemented in June. The current combination of resilient economic expansion and subdued price pressures provides the central bank with ample room to wait and watch, rather than act immediately.
A Global Trend of Monetary Policy Pause
SBI's analysis places the Indian central bank's likely decision within a broader global context. The report highlights that monetary policy worldwide has entered a phase of pause, albeit with variations across different economies. While the number of rate decisions globally in 2025 is still dominated by cuts, their frequency is expected to be far less compared to 2024.
The report also cites the International Monetary Fund's projection, which suggests global GDP growth could slow by 10 basis points to 3.2% in 2025. This potential slowdown is attributed to rising trade protectionism and economic uncertainty. Furthermore, inflation is expected to remain stubbornly above target in the United States, while staying relatively subdued in other regions.
Nifty 500 Shows Resilience Compared to S&P 500
Beyond monetary policy, the SBI report also offered insights into equity markets, drawing a comparison between the US S&P 500 and India's Nifty 500 index. It pointed out a rising concentration risk in the American benchmark, where the top 10 companies command a lopsided weightage of nearly 40%.
In contrast, the Nifty 500 appears better diversified, with a wider variety of firms from diverse sectors collectively holding a cumulative weightage of around 25%. This broader representation, according to SBI, cushions the Indian index from the potential risks associated with excessive sectoral concentration, even as the S&P 500 rallies to all-time highs.
The RBI MPC meeting is scheduled to begin on Wednesday, December 3. The final decision on interest rates, along with the committee's assessment of growth and inflation trends, will be announced by RBI Governor Sanjay Malhotra on Friday, December 5.
