Introduction to RBI Policy 2025
The Reserve Bank of India’s (RBI) monetary policy committee (MPC) is set to announce its decision on December 5, marking the last monetary policy meeting of the calendar year 2025. Experts are divided on whether the RBI will opt for a rate cut, making this meeting a highly anticipated event.
Expectations from Experts
Dharmakirti Joshi, Chief Economist at CRISIL, anticipates a 25-basis point cut in the repo rate in December, citing a significant decline in retail inflation in October. On the other hand, Divam Sharma, co-founder and fund manager at Green Portfolio PMS, notes that while inflation has been easing and global monetary conditions are turning more supportive, the domestic macro picture is not straightforward. The latest Q2 GDP growth of 8.2% has added a new layer of complexity for the RBI, making a rate cut not necessarily the most prudent move.
Analysis of the Economy
Sonam Srivastava, founder and fund manager at Wright Research PMS, believes that the upcoming RBI MPC meeting is one of the most finely balanced in recent years. Inflation has eased meaningfully, with both headline and core running well below the midpoint of the target band. However, nominal GDP growth has softened, real rates have risen, and global central banks have already moved into an easing cycle. These factors create clear space for the RBI to consider a 25 bps cut as an early move in a broader normalization path.
Policy Tone and Market Impact
The tone of the policy will carry a bigger message, and if the stance moves toward neutral or the commentary highlights sustained disinflation and easing global conditions, markets will treat this as confirmation that the easing cycle has begun. A rate cut would be constructive for markets, with bond yields responding immediately and equities likely seeing strength in rate-sensitives such as banks, real estate, and consumer cyclicals.
Takeaways for Markets
The broader signal is that policy and macro conditions are finally pointing in the same direction, offering a more supportive backdrop for 2026. Anil Rego, Founder and Fund Manager at Right Horizons PMS, notes that the RBI MPC meeting arrives at a pivotal moment for the economy, with expectations of a potential rate cut gaining momentum after the stronger-than-anticipated Q2 GDP print and a sharp easing in inflation.
RBI’s Cautious Approach
The RBI is likely to remain cautious and data-dependent, preserving policy space until it gains greater clarity on global financial stability, food-price trajectories, and the sustainability of the current disinflation trend. If the MPC opts to hold rates, the stance may still turn more explicitly growth-supportive, signaling that the door to easing is open.
Conclusion
In conclusion, the RBI’s monetary policy meeting is a highly anticipated event, with experts divided on whether a rate cut will be implemented. The tone of the policy will carry a significant message, and a rate cut would be constructive for markets. The RBI’s cautious approach will depend on various factors, including global financial stability and the sustainability of the current disinflation trend. As the economy continues to grow and inflation remains under control, the RBI’s decision will have a significant impact on the market and the overall economy.
