RBI Governor Sanjay Malhotra will announce the bi-monthly monetary policy on Friday amid mixed expectations of a 25 basis points rate cut as well as the possibility of the central bank opting for status quo. Reserve Bank's rate-setting panel -- Monetary Policy Committee (MPC) -- started its three-day deliberation on the next set of bi-monthly monetary policy on Wednesday. The meeting is taking place against the backdrop of falling inflation, rising GDP growth, the rupee crossing 90 against the dollar and ongoing geopolitical tensions.

The RBI reduced the key short-term lending rate (repo) by 100 basis points in three tranches, beginning in February, amid declining consumer price index (CPI) based inflation. Several experts said that while growth remains robust, a significant decline in retail inflation has created additional room for a reduction in the key short-term lending rate.

Even the RBI Governor last month had said that there is a scope to further reduce policy interest rates. In this backdrop, some experts believe that the RBI may continue with the pause on interest rates as economic growth has picked up, sustained by fiscal consolidation, targeted public investment, and various reforms, such as the GST rate cut. The CPI-based headline inflation is ruling below the 2 per cent lower band mandated by the government.

Besides, the Indian economy has clocked better-than-expected GDP growth of 8.2 per cent in the second quarter. The government has mandated the RBI to ensure that retail inflation remains at 4 per cent with a margin of 2 per cent on either side. The consensus is building a 25 bps rate cut in the upcoming MPC announcement on December 5, 2025, a BNP Paribas India report said.

"Most of the fundamental data points support this prognosis, given low inflation that even on consensus-expected end FY26 rebound, stays well within RBI's comfort zone. However, we are yet to change our base case assumption of no rate cut in December," it said.

Sankar Chakraborti, Managing Director and Chief Executive Officer of Acuité Ratings & Research, said expectations in the market are finely balanced as economists weigh two contrasting signals from the economy. "On one hand, both retail and core inflation have eased to multi-month lows, creating a comfortable backdrop for a potential 25-basis-point rate cut, with many analysts arguing that the sustained disinflation trend offers the RBI room to support growth," he said.