A major announcement will be made on December 5th! RBI may reduce the repo rate.

New Delhi: The month of December begins tomorrow, and several major changes (Rule Changes From December 1st) are set to take effect in the country. Home loan and auto loan borrowers may receive some good news in the first week of the month. Experts believe that due to reduced inflationary pressure, the Reserve Bank of India (RBI) may announce a 25 basis point, or 0.25%, cut in the repo rate. If this happens, loan EMIs will also decrease.

The RBI’s Monetary Policy Committee (RBI MPC) meeting will begin next week on December 3rd, and decisions taken on the repo rate and other issues will be announced on Friday, December 5th. RBI Governor Sanjay Malhotra will announce the rate-setting panel’s decision at 10 am.

The central bank began its rate-easing cycle in February last year. Before halting the repo rate cuts in August, the central bank reduced the repo rate by a total of 100 basis points in consecutive policy announcements. The repo rate currently stands at 5.5%. According to some experts, the RBI may further cut the benchmark lending rate by 25 bps in its upcoming monetary policy meeting. If such an announcement is made, the repo rate will fall to 5.25%, which will be a major relief for borrowers.

Headline retail inflation, based on the Consumer Price Index (CPI), has been hovering below the government-set low of 2% for the past two months. Experts are predicting another repo rate cut as inflationary pressures ease. However, some believe that given the better-than-expected 8.2% GDP growth rate in the second quarter, the central bank may refrain from making a rate cut.

Furthermore, they believe the RBI may continue to keep interest rates on hold because several reforms, such as fiscal consolidation, targeted public investment, and GST rate cuts, have accelerated economic growth.

CRISIL Chief Economist Dharmakirti Joshi said that the main reason for headline inflation falling below the RBI’s target range of 2-6% is the decline in food inflation. He said that core inflation, excluding gold, was 2.6% in October, supported by the GST cut. According to Joshi, “We expect a 25 basis point repo rate cut in December. Although India’s growth remains strong, the sharp decline in retail inflation in October has created more room for this adjustment.”

HDFC Bank’s report also forecast a 25 bps repo rate cut, citing inflation being under control. Meanwhile, a report from SBI’s Economic Research Department states that with strong GDP growth and low inflation, the RBI is likely to maintain a neutral stance. Bank of Baroda Chief Economist Madan Sabnavis stated that the decision on the repo rate will be closely watched. “We don’t believe there should be any change in the policy rate,” he said.