RBI MPC Minutes: Governor Voted for Rate Cut Considering Benign Inflation, Trade Talks Can Boost Growth

RBI MPC Minutes: The Reserve Bank of India's December move to trim the repo rate to 5.25% has strengthened the policy debate on how much further easing is possible, as minutes show Governor Sanjay Malhotra backing a 25-bps cut to aid growth while some economists now argue the rate cycle may be near its floor.

Malhotra's vote at the fifth bi-monthly policy review rested on the view that inflation pressures remain modest and that space exists to support demand. The meeting took place at the RBI headquarters in Mumbai on 5 December 2025, where the latest projections for growth and prices were also updated.

Growth data and outlook after RBI repo rate cut

The central bank highlighted a "rare goldilocks period" during the December decision, noting that economic expansion is strong while inflation is subdued. India's GDP growth reached 8.2% in the quarter ended September, the fastest pace in six quarters and well above the RBI's earlier 7% estimate.

Alongside the rate move, the six-member Monetary Policy Committee lifted its forecast for FY26 GDP growth to 7.3%, from 6.8% projected earlier. The same review saw the retail inflation projection cut to 2% from 2.6%, reflecting softer price trends that helped justify the latest step.

Committee reasoning and inflation trends after RBI repo rate cut

Explaining the vote, Malhotra said, "Considering the benign inflation outlook - headline as well as core - real interest rates need to be lower. Therefore, I vote for a 25-bps rate cut," said Malhotra. The statement underlined confidence that both headline and core inflation remain under control.

Malhotra also stressed the importance of keeping options open on future moves. "Moreover, I am in favour of retaining the neutral stance which gives the requisite flexibility to remain data-dependent and act according to the evolving macroeconomic conditions and outlook," said Malhotra. The stance signals that incoming data will steer any further policy changes.

India's retail inflation, based on the Consumer Price Index, edged higher to 0.7% in November from 0.25% in October. Despite this uptick, readings are still low relative to historical averages, which supports the argument that real interest rates remain elevated even after the recent rate reductions.

The December action marked the fourth repo reduction since February, with the RBI pausing during the August and October meetings. Across 2025, the Monetary Policy Committee cut the policy rate by a total of 125 basis points, making borrowing costs cheaper and putting downward pressure on deposit returns for savers.

Some analysts now question whether more easing is likely after the RBI repo rate cut. Neelkanth Mishra, chief economist at Axis Bank and head of global research at Axis Capital, said keeping rates "lower for longer" is a reasonable scenario to factor in, suggesting stability may matter more than additional cuts.

Mishra, who also serves as a part-time member of the Economic Advisory Council to the Prime Minister, added that rising prices could soon limit room for further action. "I don't expect more rate cuts because headline inflation will start rising," said Mishra. This view contrasts with markets that had looked for deeper easing earlier.

The December policy discussion, held in Mumbai and detailed in the released minutes, shows the RBI balancing robust growth, very low current inflation and expectations of some price firming ahead. The latest projections, rate path and neutral stance together point to a central bank that sees support for growth as important but remains cautious about future inflation risks.