MPC backs 25-bps rate cut amid slowing growth risks

EMERGING SIGNS OF a slowdown in economic momentum prompted members of the Monetary Policy Committee (MPC) to unanimously back a 25-basis-point cut in the policy repo rate at the December meeting, even as headline inflation fell to a record low and growth in the first half of FY26 remained strong, according to minutes released on Friday.

- FE BUREAU

While India posted a robust 8.2% GDP growth in Q2 FY26 (July-September), MPC members cautioned that the momentum may have peaked, with several high-frequency indicators pointing to a loss of traction in October amid rising global and trade-related uncertainties. The MPC voted unanimously to reduce the repo rate by 25 bps to 5.25%.

Reserve Bank of India Governor Sanjay Malhotra noted that domestic growth remained resilient but showed early signs of deceleration in the second half of the year. “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. This will also stimulate demand and be growth-supportive,” he said.