FX.co ★ India Cuts Key Rates as Expected

The Reserve Bank of India (RBI) reduced its central repo rate by 25 basis points, lowering it to 5.25%, during its meeting in December 2025, aligning with market expectations. This move signals a neutral stance, driven by declining inflation and strong GDP growth, despite the Indian rupee's depreciation. Cumulatively, the central bank has lowered rates by 125 basis points since the start of the year, marking the repo rate's lowest point since July 2022. Regarding economic projections, the RBI upgraded its GDP growth forecast for the fiscal year 2025/26 to 7.3%, improving from a prior estimate of 6.8%, with growth predictions of 7.0% for Q3 and 6.5% for Q4. Concurrently, headline inflation estimates were adjusted downward to 2.0%, compared to the earlier figure of 2.6%, ensuring it remains comfortably within the central bank's target range of 2% to 6%.