RBI may cut rates in December and February, repo rate could fall to 5 pc: Morgan Stanley
Morgan Stanley, a top global investment firm, thinks India’s central bank, the Reserve Bank of India (RBI), might start cutting interest rates as soon as December this year. They predict another reduction in February 2026, bringing the key repo rate down from its current 5.50% level to around 5% by the end of 2026.
Why the optimism? Analysts at Morgan Stanley point to cooling inflation and the push to fuel India’s strong economic growth. Consumer prices in India have been dropping lately, and global crude oil and food costs look steady, creating space for the RBI to ease its tight monetary policy.
This shift could make borrowing cheaper for everyday people and businesses, sparking more spending and investment. As the report puts it, these rate cuts would give India’s growth story a real boost.
The firm warns the RBI will stay alert to global cues, like U.S. interest rate changes and commodity prices, before speeding up any cuts. If the repo rate hits 5%, it would be the lowest in years, revving up demand for loans in big areas like housing, cars, and infrastructure projects.
For now, the RBI held the repo rate steady at 5.5% in its latest policy meeting on October 1, sticking to a neutral stance for the second time in a row. The Monetary Policy Committee voted unanimously to pause, matching what most markets expected.
Still, with softer inflation and slower nominal growth, experts see room for future RBI rate cuts. Two committee members even pushed to switch to a more supportive, accommodative policy, hinting at easing ahead.
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