Repo gets a Goldilocks cut

Central bank cites India’s robust economic growth and benign inflation to go for a 25 basis points repo cut

- Shayan Ghosh

The Reserve Bank of India (RBI) on Friday cut the repo rate by 25 basis points (bps) to 5.25%, citing a “rare Goldilocks period” where growth remains robust and inflation benign, surprising a section of the market that was expecting a pause.

Governor Sanjay Malhotra said that since the October policy, the local economy has witnessed rapid disinflation, and for the first time since the adoption of the inflation targeting framework, average headline inflation for a quarter breached the lower tolerance threshold of 2%. Average inflation measured by the consumer price index (CPI) was at 1.7% in the three months through September, against 0.3% in October.

For the quarter ended September, the Indian economy posted a surprising six-quarter high growth rate of 8.2%, significantly above the RBI's 7% projection and 7.2% median estimate ina Mint poll of 5 economists.

“..the growth-inflation balance, especially the benign inflation look on both headline and core, continues to provide the policy space to support the growth momentum,” said Malhotra.

For fiscal year 2026 (FY26), the six-member MPC raised its gross domestic product (GDP) forecast to 7.3% from 6.8% previously and lowered the retail inflation projection to 2%, from 2.6%.