RBI MPC Preview: Will the Central Bank Cut Rates Amid Rupee Weakness? Experts Share Mixed Views

By Siddhi Jain | Dec 5, 2025, 10:47 IST

The Reserve Bank of India’s Monetary Policy Committee (MPC) meeting has created an unusual level of uncertainty in the financial markets this time. With a weakening rupee, firm economic growth, and easing inflation pulling expectations in different directions, analysts say there is no clear signal on whether the RBI will cut interest rates.

While the central bank has maintained a cautious approach for several policy cycles, market participants are sharply divided this time—some expecting a modest rate cut, others predicting a status quo until global and domestic cues become more stable.

Sentiment Slightly Tilted Toward a Small Rate Cut

A recent CNBC-TV18 poll shows that the market mood is mildly in favour of a rate cut. According to the survey:

60% of economists believe the RBI may opt for a 25 basis point reduction, citing comfortable inflation and the need to support financial conditions.
40% expect the MPC to keep the rates unchanged, arguing that strong GDP growth removes the urgency for easing.

This split highlights the complexity of the current macroeconomic landscape, where inflation is soft enough to allow monetary accommodation but growth momentum discourages overreaction.

If the RBI Cuts Rates, How Long Will the Easing Cycle Last?

Even among analysts who expect a rate cut, most believe the easing cycle will be short.
According to the poll:

60% expect the easing cycle to end in December itself, with no further cuts soon.
30% see room for one additional cut in February, depending on incoming inflation data.
10% believe the easing cycle has already ended, suggesting the RBI has no need for more cuts.

Where Will the Policy Rate Eventually Stabilise?

Economists are also divided on where the terminal policy rate might settle:

60% estimate 5.25% as the most likely endpoint.
30% believe the rate could stabilise at 5.5%.
Only 10% see scope for rates to fall to 5%.

These projections indicate that while some near-term easing is possible, the RBI may stop well above pre-pandemic levels.

Growth Outlook Strong, Forecast Likely to Be Upgraded

India’s economic momentum continues to be impressive, with GDP expanding at an average rate of nearly 8% in the first half of the fiscal year. Thanks to this performance:

Over 50% of experts expect the RBI to raise its FY26 GDP forecast to 7.1–7.2%.
40% anticipate an even stronger revision, pushing projections above 7.3%.

Such optimism reflects confidence in domestic demand, investment activity, and resilience against global slowdowns.

Inflation Softening, CPI Forecast Expected to Be Cut

With inflation trending comfortably lower, analysts expect the RBI to revise its inflation projections downward.

90% of experts expect the FY26 CPI forecast to be cut to the 2–2.5% range.
The remaining 10% foresee an even deeper revision.

This anticipated downgrade could give the RBI additional comfort in adopting a softer tone during the policy announcement.

Policy Stance to Stay Neutral, But Tone May Soften

Regardless of whether a rate cut happens, most economists believe:

The policy stance will remain neutral.
Around 60% expect the RBI’s communication to turn more dovish, indicating confidence in inflation trends and a supportive environment for growth.

Rupee Weakness Unlikely to Influence the Policy Decision

Despite the rupee's recent decline, the poll results indicate that:

80% of experts do not expect currency weakness to impact the MPC’s decision.

They believe the central bank will continue prioritizing its inflation target and growth support rather than reacting directly to currency fluctuations.

What About Liquidity? RBI May Announce Support Measures

Liquidity conditions in the banking system have tightened due to tax outflows and foreign exchange interventions. Seasonal cash withdrawals between December and March are expected to place additional pressure on the system.

Market watchers expect the RBI to signal liquidity-enhancing measures, potentially through:

Operation Twist, or
Open Market Purchases (OMOs)

to ensure healthy credit flow and stable financial conditions.