RBI Likely to Keep Interest Rates Steady at 6.50% in December

The Reserve Bank of India (RBI) is likely to hold steady on interest rates during its December 6 meeting. Rising consumer inflation has prompted many economists to push their predictions for the next rate cut back to February, according to a recent Reuters poll.

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Annual retail inflation in October crossed the RBI’s upper limit of 6%, mostly driven by climbing food prices. RBI Governor Shaktikanta Das, who may see his tenure extended, has warned against cutting rates too soon, calling it a risky move.

Even though the RBI shifted to a “neutral” monetary policy stance in October and some government officials are advocating for rate cuts to boost a slowing economy, most experts don’t see any immediate changes. In a Reuters survey conducted between November 18 and 27, 62 out of 67 economists said they expect the RBI to maintain the current repo rate at 6.50% after the December 4–6 meeting. Only five predicted a small 25-basis-point cut.

That’s a noticeable shift from last month’s survey, where a slight majority expected a December cut to 6.25%.

Shilan Shah, Deputy Chief Emerging Markets Economist at Capital Economics, shared his thoughts: “If Governor Das stays on, a policy loosening in the near term seems unlikely. Das has leaned hawkish in recent months.” He added that easing could come later if signs of an economic slowdown and cooling inflation emerge.

Among economists who participated in both the October and November surveys, 21 out of 48 pushed their expected timeline for the first rate cut from December to February or later.

HSBC India Chief Economist Pranjul Bhandari, one of those who adjusted her forecast to February, explained the reasoning: “Policymakers appear cautious due to repeated inflation shocks, especially from volatile vegetable prices. They seem more comfortable waiting until February or April to consider rate cuts.”

The poll’s median forecast suggests the RBI will gradually cut rates by 50 basis points, bringing the repo rate to 6.00% by June 2025. However, economists expect the central bank to maintain a long pause on further cuts until early 2026. This slow and steady approach stands in contrast to central banks like the U.S. Federal Reserve, which is anticipated to cut rates again in December and lower them by at least 50 basis points in 2025.

Gaura Sengupta, Chief Economist at IDFC Bank, added some perspective: “The Fed’s rate decisions could shape the pace of cuts in emerging markets. If the Fed’s rate cut cycle is slower than expected, due to factors like expansionary fiscal policies or rising trade tariffs, that could limit how quickly emerging markets can follow suit.”

Sengupta also flagged risks to her forecast, noting that domestic growth could slow down even more than expected. India’s economy is projected to grow 6.8% this fiscal year and 6.6% in the next—significantly slower than the 8% growth recorded in FY 2023/24.