RBI Monetary Policy Committee (MPC) meeting. It’s the central bank telling everyone what borrowing money is going to cost. It’s dense, but the story here is simple: High Growth + Low Inflation = Rate Cut.
Here are the notes, raw and straight up, on the December 2025 policy:
RBI MPC Dec 2025: Goldilocks and the 25 BPS Cut
The MPC met from December 3rd to 5th. They had to weigh two massive pressures: GDP growth is strong as hell (8.2% in Q2, revised up for the full year to 7.3%), but the rupee is weak, flirting with that 90-to-the-dollar line. A lot of analysts thought the weak rupee would make the RBI pause, or nothing.
Here’s the kicker: They didn’t pause. They went for growth.
The Big Decisions (Unanimous Vote)
Repo Rate Cut: Slashed by 25 basis points (bps). The new rate is 5.25%. This is the first cut in six months and 125 bps total cut this year.
Policy Stance: Kept it Neutral. This means they aren’t committing to more cuts or hikes. They are keeping their powder dry.
Inflation & Growth: They basically declared victory on prices. They dramatically lowered the inflation forecast for FY26 to 2.0% (down from 2.6% earlier). GDP growth was raised to 7.3% (up from 6.8%).
Why The Cut Now? The “Goldilocks Zone”
Governor Sanjay Malhotra said India is in a “rare Goldilocks period.” What does that mean?
It’s an economic term that comes from that kids’ story. The economy is “just right”: it’s not too hot (which brings high inflation), and it’s not too cold (which brings a recession). We have strong, resilient growth and super low inflation (CPI was at a multi-decade low of 0.25% in October, let’s be real).
This low-inflation headroom, the RBI argued, lets them be “growth supportive.” The rate cut aims to keep this high-growth party going.
The Liquidity Boost (Rupee Stability)
They knew cutting the rate might weaken the rupee further, so they added two massive liquidity boosters to balance it out:
OMO Purchases: ₹1 lakh crore (1 trillion rupees) in Open Market Operations (OMO) to buy bonds. This injects cash into the banking system.
Dollar-Rupee Swap: A $5 billion swap in December. This helps stabilize the currency and injects short-term rupee liquidity without long-term printing.
The Impact Report
Loans: Home loan EMIs should start falling. Loans for real estate, MSMEs, and trucks are expected to get cheaper quickly. This is good news for borrowing.
Rupee/Bonds: The rupee actually held onto gains after the announcement, strengthening slightly to 89.7750 against the dollar. The 10-year government bond yields fell (meaning bond prices rose). The market loved the liquidity injection.
The Consensus: Analysts are calling this a “calibrated maintenance cut.” It aligns with the data, supports growth, and is backed by enough liquidity injection to manage the currency risk. It is a calculated gamble, or nothing. Some analysts believe this might be the last cut in this cycle.
End. . .
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