The Reserve Bank of India (RBI) is expected to cut the repo rate by 25 basis points, bringing it down from 5.50% to 5.25% during the upcoming Monetary Policy Committee (MPC) meeting scheduled for early December, according to a recent Morgan Stanley report. The global investment firm believes that easing inflationary pressures and the need to support economic growth provide enough room for the central bank to begin its first rate-cut cycle since the pandemic-era tightening phase.

Key Highlights

• The Reserve Bank of India is expected to cut the repo rate by 25 bps to 5.25% in December. 
• The bank intends to maintain a prudent, data-dependent policy stance, evaluating rates, liquidity and regulatory measures carefully. 

The report suggests that the RBI will likely maintain a cautious and broadly prudent monetary stance, even after the reduction. Rather than shifting immediately to an accommodative cycle, the central bank is expected to follow a data-driven approach, closely monitoring inflation patterns, liquidity conditions, and global economic cues. Morgan Stanley also notes that the RBI could rely on its three-pillar easing framework—interest-rate adjustments, liquidity management, and regulatory measures—to assess the overall impact of the policy shift before making further moves.

Inflation in India has remained within the RBI’s comfort band in recent months, supported by softening food prices and steady core inflation. However, the central bank is not expected to rush into aggressive easing, given global uncertainties, elevated oil prices, and the potential for supply-side shocks.

On the fiscal side, the report expects the government to continue its path of consolidation, maintaining fiscal discipline while prioritizing capital expenditure to keep the momentum of medium-term growth. Any repo rate cut may improve borrowing conditions for households and businesses, potentially reducing EMIs on loans and improving overall credit demand.

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If implemented, the rate cut would signal the beginning of a gradual policy normalization phase, aimed at balancing growth support with inflation control in a shifting global macroeconomic environment. If you want, I can also summarize the impact on consumers, banks, and markets.