RBI monetary policy: Rupee slump complicates path to an RBI repo rate cut

The Reserve Bank of India’s final repo rate call of the year is shaping up to be one of its toughest. MPC members must balance India’s extremely low inflation with a sharply weakening rupee and robust GDP growth above 8%. A Bloomberg poll of 44 economists shows most expect a 25-basis-point cut to 5.25%, since inflation is far below the 4% target. However, with the rupee hitting record lows under 90 per dollar and the economy expanding strongly, many institutions — including Citigroup, Standard Chartered and SBI — believe the RBI may maintain its pause.

Although Governor Sanjay Malhotra recently hinted that rate cuts were possible, new data shows India’s economy has held up despite steep US tariffs, even as the rupee has slumped. This has reduced expectations of an imminent cut, with SBI’s Soumya Kanti Ghosh suggesting the RBI may now stay on hold for an extended period.

The currency’s steep fall has complicated Friday’s decision. Some analysts warn that cutting rates could intensify pressure on the rupee, though others see a weaker currency as a buffer against tariff shocks. Markets will watch Malhotra’s Friday address for updated inflation and growth forecasts, guidance on the rupee, signals on liquidity, and any hints about future bond market support.