The Reserve Bank of India (RBI) cut its key repo rate by 25 basis points on Friday, in line with a consensus view, as record low retail inflation and a benign outlook for prices provided ample room to further support economic growth.
The RBI also decided to conduct open market operations of 1 trillion rupees ($11.14 billion) and $5 billion in forex swaps to add liquidity and speed up transmission of lower rates.
The six-member monetary policy committee voted unanimously to lower the repo rate to 5.25% and has now cut rates by a total of 125 basis points since February 2025. It held rates in August and October. The Indian economy is facing a "rare goldilocks" period, RBI Governor Sanjay Malhotra said in a video address.
Since October, Indian economy has seen rapid disinflation leading to a breach of the central bank's lower threshold of tolerance, said Malhotra, adding that growth had remained strong.
A majority of economists in a Reuters poll conducted ahead of last week's GDP data had expected the repo rate to be reduced by a quarter point at the policy meeting, followed by a pause through 2026.
However, some analysts and market participants had pared down their rate cut bets after data showed the South Asian economy expanded at a sharper-than-expected clip of 8.2% in the July-September quarter. On the other hand, retail inflation stood at an all-time low of 0.25% in October and is expected to remain soft in coming months.
The MPC retained the monetary policy stance at 'neutral'.