RBI MPC December: Inflation Hits Record Low, Projected at 2% for FY26

Mumbai, Dec 5: The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday announced a widely expected 25 basis point reduction in the repo rate, bringing it down to 5.25 per cent, while keeping the policy stance neutral. The decision reflects the RBI’s view that price stability has improved, allowing for a greater focus on sustaining economic growth.

Inflation Forecast Revised to 2% for FY26
In its key revision, the RBI lowered its FY26 inflation projection to 2 per cent, down 0.6 percentage points from the October forecast. Quarterly projections for FY26 now stand at:

Quarter Earlier Now
Q3 FY26 1.8% 0.6%
Q4 FY26 4% 2.9%
Q1 FY27 4.5% 3.9%

The central bank attributed the soft inflation trajectory to improved food supply, favourable reservoir levels, adequate soil moisture, and easing global commodity prices. Governor Sanjay Malhotra highlighted that headline inflation fell to 0.3 per cent in October 2025, with real GDP growth reaching 8.2 per cent in Q2 FY26, boosted by strong festive season spending.

Growth Takes Centre Stage
With inflation at multi-year lows, the MPC emphasised that price stability now serves as an enabler for growth rather than a constraint. While minor upward pressures from metals were noted, overall inflationary trends remain benign. The RBI flagged that further policy action will depend on global trade dynamics, domestic supply conditions, and geopolitical developments.

Liquidity Measures Announced
Governor Malhotra reaffirmed the RBI’s readiness to actively manage liquidity. The central bank will conduct Open Market Operations (OMO) purchases of government securities worth Rs 1 lakh crore and a three-year rupee buy-sell swap of 5 billion USD in December to inject durable liquidity into the system.

The RBI stressed that headline inflation “has eased significantly and is expected to remain softer than earlier projections,” creating a conducive environment for economic expansion.