Rate Cut On The Cards? All Eyes On RBI MPC Meeting Outcome Today

The Monetary Policy Committee (MPC) of the RBI will make the biggest announcement today. Real GDP growth of 8.2% in the last quarter reflects solid underlying activity, but nominal GDP at 8.7 per cent is far below the Union Budget’s 10 per cent projection. This gap brings focus on the government’s fiscal arithmetic, as tax revenues are unlikely to meet Budget estimates at the current nominal growth pace.

Cooling PMI, High Real Rates Add Pressure

The very low CPI and the very low WPI are reaching stall rates, while the real interest rate is staying high with the RBI repo rate at 5.5 per cent and CPI at 0.25 per cent. PMI is showing signs of easing. The PMI dropped to 56.6 in November, slipping from 59.2 in October, marking the weakest operating conditions since February. This strengthens the argument for rate easing, especially since the RBI has already cut 100 bps since February. 

During this period:

• Rates on outstanding loans fell 54 bps
• Outstanding deposits declined 20 bps
• Fresh loans and deposits fell 100 bps and 89 bps, respectively

Weak Rupee Limits RBI’s Room to Cut

Despite soft inflation, the central bank faces constraints. The Indian Rupee remains under pressure from:

• Persistent FPI outflows
• Heavy foreign PE activity and promoter selling via IPOs and OFSs
• Constrained FDI inflows in a scenario shaped by steep US tariffs

Forecast: What the RBI May Announce Today

With conflicting data points and divided economist polls, today’s policy outcome is tough to predict. Based on the current macro landscape, here’s what to expect:

1. RBI will cut its inflation projection for Q4, FY2026 and for FY2027 by around 0.2 per cent.
2. GDP growth number will be raised for FY2026 to 7 per cent 
3. Policy stance will stay neutral. RBI has reduced the policy rate by a cumulative 100 basis points (bps) since February this year. During this period, rates on outstanding loans declined 54 bps, while outstanding deposits fell 20 bps. Rates on fresh loans and deposits declined by 100 bps and 89 bps, respectively.
4. Given inflation is below the RBI band of 4 per cent +/- 2 per cent, there is policy space to cut today. We expect a 0.25 per cent rate cut to stimulate the economy towards a double-digit nominal GDP growth
5. For the Rupee, RBI will reiterate that it does not target any currency level, but works to ensure that the currency moves stay orderly and to dampen down volatility.
6. Expect no change in CRR/SLR levels. The RBI may announce measures related to liquidity management (e.g., OMOs) to address any short-term tightness in the money market, rather than altering CRR/SLR.

Most economists' polls are divided on today's RBI MPC outcome. We will know at 10 AM. The market will be parsing the Governor’s statement not just for the rate, but also for the forward guidance on the sustainability of disinflation and the RBI's comfort level with the current growth momentum