Introduction
The Reserve Bank of India (RBI) is poised to announce its latest policy decision today, with Governor Sanjay Malhotra presiding over the Monetary Policy Committee (MPC) meeting. The announcement comes at a critical juncture for the Indian economy, as the rupee recently touched an all-time low of 90 against the US dollar, despite easing inflation and steady economic growth.
Rupee Depreciation Raises Market Concerns
The sharp fall in the rupee has triggered fresh apprehension among investors and market participants. Even though the currency breached the psychologically significant 90 mark, the RBI has largely refrained from aggressive intervention, stepping in selectively to stabilize fluctuations. This cautious approach has fueled speculation about potential policy adjustments in today’s meeting.
Earlier RBI Measures
Earlier this year, the RBI implemented a cumulative 100-basis-point repo rate cut over three rounds, capitalizing on a declining inflation trend. However, the current economic environment presents a more complex scenario. While inflation is moderating and GDP growth remains robust, the weakening rupee and global uncertainties add layers of complexity to the central bank’s decision-making process.
Rate Cut Possibilities
Expert Opinions on Immediate Cuts
Vinayak Magotra, Product Head at Centricity WealthTech, believes the RBI is unlikely to announce a rate cut at this meeting. He highlights that while headline inflation has eased, the improvement may not be stable enough to justify aggressive action. Magotra points out that volatility in food prices and global economic uncertainties, including delays in the US–India trade deal, warrant caution.
Magotra further noted that earlier rate cuts are still filtering through the economy. “It will be prudent to assess their full impact before implementing additional easing. Although the Governor’s recent communications suggest a subtly softer approach, the RBI may focus on preparing the ground for future rate reductions rather than cutting rates immediately,” he explained.
Potential for a Smaller Cut
Shubham Gupta, CFA and co-founder of Growthvine Capital, anticipates a modest rate reduction. He emphasizes that headline inflation has fallen to multi-decade lows due to broad-based food disinflation and recent GST-related price softening. Elevated real interest rates provide room for easing, yet core inflation remains sticky in some sectors, and global risks such as commodity volatility and external demand pressures could restrain the central bank.
Gupta predicts a measured approach: “A first cut of 25 basis points is possible at the upcoming meeting, with another potential 25-basis-point reduction in early 2026, contingent on stable inflation and global conditions.”
Policy Tone Versus Rate Decision
JM Financial Institutional Securities emphasizes that the RBI faces a delicate balancing act, attempting to support growth while maintaining price stability. The firm expects the RBI to revise its FY26 growth projection to 7% while lowering inflation forecasts to 2.2%.
Currency fluctuations, specifically the rupee’s depreciation, are unlikely to directly influence the MPC’s decision, as managing the currency does not fall under its primary mandate. According to JM Financial, the tone of the policy statement may carry more weight than the actual rate decision.
The central bank may also leverage Open Market Operations (OMO) to manage liquidity and reassure bond markets. While liquidity is currently adequate, upcoming tax outflows and forex pressures could necessitate fresh liquidity injections.
Conclusion
The RBI’s policy announcement is being closely watched as the central bank navigates a challenging economic landscape. With inflation easing but the rupee under pressure, investors and analysts are focused not only on potential rate changes but also on the guidance provided regarding future monetary policy direction.
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