The Reserve Bank of India (RBI) has once again opted for a wait-and-watch approach, keeping the key policy rate steady in its final bi-monthly monetary policy review of the year. Governor Sanjay Malhotra announced the decision of the Monetary Policy Committee (MPC) on Friday, December 5, following a three-day meeting that commenced on Wednesday, December 3.
RBI MPC Decision: A Fourth Consecutive Pause
As widely anticipated by financial markets, the MPC decided to leave the benchmark repo rate unchanged at 5.5%. This marks the fourth meeting in a row where the central bank has held rates steady, following a pause in the previous review in October. Governor Malhotra highlighted that a significant easing in inflationary pressures has provided the committee the room to maintain its existing policy stance for now.
The current cycle has seen the RBI reduce the repo rate by a cumulative 100 basis points (bps) earlier in the year, bringing it down from 6.5% to the current 5.5%, before halting further cuts in August. The latest decision comes against a complex economic backdrop characterized by moderating inflation, robust GDP growth figures, a rupee trading above 90 against the US dollar, and persistent global geopolitical tensions.
Market Expectations and Expert Commentary
In the lead-up to the announcement, analysts and banking experts had largely forecasted a status quo. Most institutions, including Yes Bank's research arm Ecologue, projected that the space for immediate rate cuts was limited. "We expect the RBI to stay on a pause in December and keep rates and stance unchanged. Space for incremental rate cuts by the RBI is limited," the note stated.
The December policy meeting was closely watched for signals on the future trajectory. According to Ajay Garg, CEO & Director of SMC Global Securities, several positive factors are aligning. "Easing inflation driven by GST rate cuts, sustained food-price deflation, and a steady decline in core inflation have strengthened hopes that the RBI may prepare the ground for a rate cut in early 2026," Garg explained.
He further added that a stable global environment, moderating bond yields, and the prospect of steady foreign institutional inflows support a supportive tone from the central bank. The current focus, experts suggest, is likely on managing liquidity conditions and striking a balance between inflation control and supporting economic growth momentum.
How to Follow the RBI Announcement
Governor Sanjay Malhotra unveiled the policy outcome at 10 a.m. on Friday, December 5. This was followed by a post-meeting press briefing by the Governor at 12 p.m. For the public and stakeholders, the central bank provided live coverage of the Governor's address on its official YouTube channel. The speech was also available for real-time viewing on the RBI's official website and its account on the social media platform X (formerly Twitter).
While the RBI has held its ground this time, the financial community is now looking ahead. The consensus suggests that the central bank is engaged in a slow and steady shift towards a more accommodative policy stance, with many anticipating the groundwork for a potential rate cut in the first half of the next calendar year, provided inflation remains within the target band.
