RBI MPC minutes show broad support for rate cut, one member pushes for 'accommodative' stance

Most members of the Reserve Bank of India (RBI) backed the recent interest rate cut citing exceptionally low inflation and signs of a slowdown in growth momentum, while one member argued for a shift to an accommodative policy stance to better support the economy, minutes of the meeting showed on Friday.

The RBI’s six-member Monetary Policy Committee (MPC) unanimously voted to cut the benchmark repo rate by 25 basis points to 5.25% at its December 3–5 meeting, marking the fifth rate reduction this year, while retaining a “neutral” stance.

Inflation well below target

Members highlighted a sharp and broad-based moderation in inflation as the main driver of the easing decision.

The committee revised its full-year inflation forecast for 2025–26 down to 2.0%, well below the central bank’s 4% target, and projected inflation to remain benign through much of next year.

“The growth-inflation balance, especially the benign inflation outlook on both headline and core, continues to provide the policy space to support the growth momentum,” the document stated. “Accordingly, the MPC unanimously voted to reduce the policy repo rate by 25 bps to 5.25%.”

Growth strong but losing momentum

While India’s economy expanded at a six-quarter high of 8.2% in the July–September quarter, several members cautioned that high-frequency indicators pointed to a moderation ahead.

Weakness in manufacturing output, exports and purchasing managers’ surveys suggested growth may slow in the second half of the fiscal year, the minutes showed.

The central bank projected economic growth at 7.3% for 2025–26, with risks evenly balanced, but flagged external uncertainties including trade tensions and weaker global demand as potential headwinds.

Debate on policy stance

Professor Ram Singh was the lone voice calling for a shift in stance from "neutral" to "accommodative", arguing that real interest rates remained too high given the sharp fall in inflation and that delaying further easing could hurt growth.

“In view of the dormancy in the price momentum underlying headline CPI and CPI core, and the case for supporting growth momentum, the rate cut should be accompanied by a change in stance to “accommodative”,” Singh said.

Other members supported retaining a neutral stance, citing the need for flexibility amid global uncertainties and volatile capital flows.

“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,” RBI Governor Sanjay Malhotra said.

The next policy review is scheduled for February 4–6, 2026.