“Domestic growth has sustained its momentum, with private consumption and investment growing in tandem. Resilient growth gives us the space to focus on inflation so as to ensure its durable descent to the 4% target,” said Das. He emphasised that the MPC will monitor the evolving inflation outlook in the coming months, aiming to ensure inflation aligns with the target while supporting growth.
Also read: RBI MPC shifts gear to ‘neutral’ while retaining repo rate at 6.5%; A look at inflation, GDP targets
Economists have responded to the RBI’s stance change with predictions of a potential rate cut in the near future. “While this signals circumspection, it also underscores the likelihood of a rate cut in December,” said Dharmakirti Joshi, Chief Economist at CRISIL, who forecasts a 25-basis-point reduction during the December policy review.
Deloitte India’s Rumki Majumdar echoed this view, noting that the shift to a neutral stance indicates the RBI’s readiness to support economic activities. “The RBI may go for a rate cut in December if necessary, especially depending on price movements during the festive months,” Majumdar added.
Aditi Nayar, Chief Economist at ICRA Ltd, also expressed optimism about a December rate cut. “Changing the stance to neutral has opened the door for a potential rate cut in December, if inflation risks remain contained,” she said, adding that the Indian rate cut cycle would likely be limited to 50 basis points over the next two policy reviews.
When was the repo rate hiked the last time?
Two years ago, in response to global central banks raising interest rates to combat high inflation, the RBI embarked on a series of repo rate hikes.
Between May 2022 and February 2023, the Monetary Policy Committee (MPC) increased the repo rate (key policy rate) by 250 basis points, bringing it to 6.5%.
Since then, the MPC has maintained the repo rate at this level, opting for no changes across the last nine policy review meetings.
- Repo Rate: The central bank maintained the key lending rate, with a 5:1 majority, at 6.5%.
- SDF & MSF Rates: SDF rate at 6.25%, MSF and bank rates were kept unchanged at 6.75%.
- GDP: The GDP growth forecast for FY25 retained at 7.2%. Across quarters, GDP growth rate was pegged at 7% in Q2, followed by 7.4% in both Q3 and Q4, and a slight dip to 7.3% in Q1 of FY26.
- Inflation: Inflation for FY25 is projected at 4.5%, with quarterly figures at 4.1% in Q2, rising to 4.8% in Q3, and easing slightly to 4.3% in Q1 FY26.
- Rupee update: Indian rupee continues to be the least volatile among other currencies, said RBI governor.
- Strong message to NBFCs: Banks and NBFCs on their part ned to carefully assess their exposures.
- FPIs: FPI flows seen a turnaround from net outflows to net inflows to $19.2 bn during June-Oct
- CAD: India’s current account deficit widened to 1.1% of GDP inQ1FY25.
- Responsible lending conduct: Banks and NBFCs not permitted to levy pre-payment penalties on any floating rate term loan sanctioned to individual borrowers for non-business purposes.
- Discussion paper on capital raising avenues for Urban Cooperative Banks (UCBs) to be issued for stakeholder feedback.
- RBI to launch the Reserve Bank Climate Risk Information System (RBris) for better climate risk assessment by financial institutions.
- UPI One Three Pay transaction limit increased from Rs 5,000 to Rs 10,000; UPI Light wallet limit raised from Rs 2,000 to Rs 5,000, with per-transaction limit increased to Rs 1,000.
- Beneficiary account name lookup facility to be introduced for RTGS and NEFT systems, reducing wrong credits and fraud.