Mumbai: Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Monday that there was headroom for a repo rate cut to spur growth at the next monetary policy review meeting in December due to favourable macroeconomic indicators.
Malhotra had also stated after the last monetary policy committee meeting in October that there was scope for a repo rate cut going ahead as inflation had declined, leaving space for the RBI to focus on growth.
“In October, the Monetary Policy Committee (MPC) said there is scope for a further rate cut. Since then, whatever data we have received in terms of macroeconomic indicators has not reduced the scope for a rate cut. There is a scope for a further rate cut, but it is up to the MPC to decide on rate action in the December policy,” Malhotra said in an interview with Zee Business.
He also said that the central bank has two mandates — to maintain price stability and maintain growth.
“We don’t remain aggressive on growth, nor do we remain defensive,” Malhotra remarked.
The monetary policy committee, chaired by the RBI Governor, had left the repo rate unchanged in the last two reviews, held in August and October, in order to keep inflation in check.
Before that, the RBI reduced the repo rate by 100 bps from 6.5 per cent to 5.5 per cent between February and June.
The RBI has already lowered its headline CPI inflation forecast for FY26 to 2.6 per cent from 3.1 per cent earlier, which gives it space to focus on growth.
The RBI also upgraded its GDP forecast for FY26 to 6.8 per cent year-on-year from 6.5 per cent earlier, although it indicated a potential moderation in growth in the first half of FY26 due to trade and tariff-related headwinds.
Meanwhile, leading global financial services firm Morgan Stanley, in a recent report, said that it expects the RBI to reduce the repo rate by 25 basis points to 5.25 per cent at the monetary policy committee meeting scheduled for the first week of December 2025.
The report states that RBI is expected to adopt a wait-and-watch position as it evaluates its three-pronged easing cycle covering interest rates, liquidity conditions, and regulatory measures.
This would give the RBI room to assess how these changes interact with domestic growth patterns and inflation indicators before deciding on any future action.
(IANS)
