RBI interest rate decision: RBI repo rate cut after India inflation drops?

India’s CPI inflation hits a multi-year low, sparking speculation in market on whether the RBI will cut the repo rate.

Current Inflation Trends in India

India’s retail inflation fell to a historic low of 0.25% in October 2025. For this sharp decline in the consumer price index (CPI), there’s room for a potential repo rate cut and monetary policy change easing by the Reserve Bank of India (RBI). The repo rate is the rate at which banks borrow from the central bank.

Low Inflation effects on Interest Rates

Low inflation in India is mainly due to falling food prices and recent GST rate cuts. However, core inflation, which excludes food products and fuel stayed higher at 4.4% partly because of rising gold prices. CPI for September 2025 has also been revised downward, reflecting some impact of GST cuts. Economists forecast FY26 inflation at around 2%, below the RBI’s target of 2.6%. If inflation stays low and growth momentum holds, the RBI could do a rate cut in December 2025 that could mark the beginning of a new price stability and sustainable growth cycle.

RBI Policy and Interest Rate Decision

The next Monetary Policy Committee (MPC) meeting is scheduled for December 3–5, 2025. In October, the RBI kept the repo rate at 5.50% and did not change the interest rate for lending to banks. The RBI also kept a neutral stance and decided not to make changes to monetary policy. At the same time, global central banks, including the United States Federal Reserve System, have also lowered rates, and 10-year government bond yields dropped to 6.52%, signaling markets are expecting a rate cut.

Balancing Growth and Financial Stability

With inflation at a record low and borrowing costs showing signs of easing, the RBI faces a decision on whether to adjust the repo rate. The central bank will need to balance supporting economic growth with maintaining financial stability before making any changes to monetary policy.

With inflation at a record low that shows signs of lowering the repo rate, RBI’s decision on whether to change the repo rate will ease price pressure in the economy. Any change in the repo rate by the central bank would influence borrowing costs for businesses and households, impacting weighing inflation trends, credit growth, and global economic conditions.