Will 6-quarter high GDP growth, record low inflation prompt MPC to cut rate in December?

All eyes will be on RBI Governor Sanjay Malhotra on Friday morning as he announces the outcome of the bi-monthly review of the Monetary Policy Committee (MPC) after three days of deliberations. This is the last scheduled review of the calendar year and comes days after official data showed India’s GDP growth hitting a six-quarter high with retail inflation at an all-time low -- settings that typically favour a rate cut. Yet, economists remain divided on whether the Malhotra-headed panel will cut the benchmark lending rate in December, after keeping both the repo rate and the policy stance unchanged in the previous meeting.

The MPC has already trimmed the repo rate -- the key interest rate at which the RBI lends to commercial banks -- by 100 basis points (bps) across three revisions in the current easing cycle that began in February. The repo rate currently stands at 5.50 per cent, with the stance at ‘neutral’.

The RBI will kick off the three-day MPC review on Wednesday. The committee meets six times a year for scheduled reviews and any additional number of times if required, especially in emergencies like the pandemic. This review follows the MPC’s status quo on rate and stance in October.

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What do economists expect in the December MPC review? Will there be a repo rate cut?

Fifty-three per cent of economists polled by Zee Business expect no change in the repo rate in December, while the rest anticipate a 25-bp cut.

Will the stance change?

Two-thirds of economists expect the MPC to maintain the ‘neutral’ stance -- which allows flexibility in either direction -- while the remaining participants expect a shift to ‘accommodative’.

Will the RBI tweak inflation or GDP forecasts?

Four-fifths of the economists polled expect revisions in both GDP and CPI projections.

In October, the MPC raised its FY26 growth projection by 30 bps to 6.8 per cent and cut its inflation projection by 50 bps to 2.6 per cent.

Key things to watch out for

According to Zee Business research, the RBI’s commentary will be closely tracked for:

• Rupee depreciation
• Future rate-cut signals
• Open Market Operations (OMO)
• Consumption growth and demand outlook