RBI – Monetary Policy Panel Begins Deliberations Ahead of Friday Decision

RBI – The Reserve Bank of India’s Monetary Policy Committee began its scheduled three-day meeting on Wednesday, setting the stage for a policy announcement due on Friday by RBI Governor Sanjay Malhotra. The discussions come at a time when the central bank has already delivered substantial monetary support to the economy over the past year.

Policy Review Against a Backdrop of Rate Cuts

The current meeting follows a series of rate reductions aimed at sustaining economic momentum while maintaining price stability. Since February last year, the RBI has lowered the repo rate by a cumulative 125 basis points. This steady easing cycle has underscored the central bank’s intent to cushion growth amid shifting global and domestic conditions, while remaining attentive to inflation risks.

Policy watchers note that the scale of earlier cuts has already provided significant liquidity support to the financial system, making the present deliberations particularly important for guidance on the future policy path.

Focus on Inflation and Growth Assessment

Over the three-day meeting, MPC members are expected to conduct a detailed review of key macroeconomic indicators. These include recent inflation readings, demand trends, and signals from core sectors of the economy. The committee traditionally balances these factors before reaching a consensus on interest rates and broader policy stance.

Officials are also likely to evaluate how earlier rate reductions are feeding into credit growth, consumption, and investment activity, as well as any emerging risks from global financial markets.

Recap of the Previous MPC Decision

At its last meeting, the RBI reduced the policy repo rate by 25 basis points, taking it down to 5.25 per cent. The decision was announced on December 5 after the conclusion of the committee’s December 3–5 deliberations.

Alongside the rate move, the central bank updated its assessment of the economic outlook, signaling a more optimistic view of domestic growth conditions than previously anticipated.

Upward Revision in Growth Outlook

In its earlier policy statement, the RBI projected that the Indian economy would expand by 7.3 per cent in the current 2025–26 fiscal year. This represented an increase of around 50 basis points from the central bank’s previous estimate.

The upward revision was attributed to stronger-than-expected domestic activity, resilient consumption patterns, and improving momentum across several sectors. The assessment suggested growing confidence within the central bank regarding the economy’s underlying strength, even as global uncertainties persist.

Inflation Trends Remain in Comfort Zone

On the price front, recent data from the Ministry of Statistics and Programme Implementation indicated that consumer price inflation in December 2025 stood at 1.33 per cent on a year-on-year basis, on a provisional basis. This compared with inflation levels recorded in December 2024.

The monthly rise in inflation was driven mainly by higher prices in categories such as personal care and effects, vegetables, meat and fish, eggs, spices, pulses, and related products. Headline inflation in December increased by 62 basis points compared with November.

Despite the month-on-month rise, overall inflation has remained below the RBI’s medium-term target of 4 per cent for the eleventh consecutive month. This sustained moderation has given policymakers additional room to focus on growth considerations without immediate pressure from price instability.

Markets Await Policy Signals

The outcome of the ongoing MPC meeting is expected to be closely tracked by financial markets, economists, and businesses. Beyond the immediate rate decision, investors will look for cues on the RBI’s assessment of inflation risks, growth durability, and the likely trajectory of monetary policy in the months ahead.

With inflation staying within a comfortable range and growth projections holding firm, the committee’s communication on Friday will play a key role in shaping expectations about the balance between continued support and policy caution.