The Reserve Bank of India (RBI) is projected to retain the repo rate at 5.50 percent in its upcoming monetary policy decision on Friday, according to a forecast by Bank of Baroda.
Key Highlights
- Bank of Baroda expects the RBI to keep the repo rate unchanged at 5.50 percent in December.
- Stable inflation and supportive economic conditions strengthen expectations of a continued rate pause by RBI.
According to the report, the central bank will probably continue to take a neutral posture. It said, "We anticipate that the RBI will maintain the repo rate at 5.50 percent in its December 25. It is also anticipated that the position will remain neutral. According to the research, India's economy has continued to function well, with GDP growth above market estimates in the second quarter of FY26 at 8.2%.
Improved urban consumption and robust rural demand are expected to have sustained the momentum in the third quarter as well. The report also pointed out that private investment is showing signs of revival, aided by a boost in credit demand.
The report noted that price pressures had significantly decreased in relation to inflation. CPI inflation declined to a series low of 0.25 percent in October 2025, mostly due to a continued decline in food prices. Inflation is projected to drop further and could go below the RBI's own predictions.
The report also credited improved production patterns, timely supply-side actions, and plenty of rainfall for the improved forecast for food inflation. The report stated that although core inflation is still greater than 4%, this is mostly because of rising gold prices rather than robust demand. The impact of this has been largely mitigated by the benefits of lower GST rates.
Also Read: RBI MPC Holds Repo Rate at 5.5%, Maintains Neutral Stance
Despite the potential for a rate decrease, the report claimed that the RBI is likely to be cautious at the upcoming meeting, particularly since growth remains strong. The report also stated that additional monetary support may be required in the future, particularly if the current tariff-related issues continue. Maintaining the present rate will also give more time for earlier rate decreases to be fully absorbed by the system.
Given recent economic indications, the study expects the Monetary Policy Committee (MPC) to raise its growth forecasts. At the same time, inflation expectations are expected to be lowered lower. In a unanimous vote at the October policy meeting, the RBI committee maintained the policy repo rate at 5.5 percent.
The MPC meeting is set for December 3rd to December 5th, with the policy decision revealed on December 5th at 10 a.m. by RBI Governor Sanjay Malhotra.
