Benign inflationary trends leave space for RBI’s MPC to cut repo further, economists say

Core Insights - India's Consumer Price Index (CPI) has remained below 2% for the last three months, leading economists to suggest potential for further repo rate cuts by the Reserve Bank of India (RBI) [1][2] - The RBI's monetary policy committee (MPC) may consider a final 25 basis points (bps) rate cut in February 2026, potentially lowering the repo rate to 5% [2] - Retail inflation measured by CPI was 0.7% in November 2025, a slight increase from 0.3% in the previous month [3] Inflation Outlook - Inflation is expected to remain benign until the first half of FY27, with projections of 1.8% for FY26 and 3.4% for FY27 due to lower food inflation and favorable agricultural conditions [5] - The RBI has indicated that the current repo rate of 5.25% may remain lower for an extended period, with the possibility of future rate decisions depending on economic data [6] - The upcoming launch of a new CPI series is anticipated to be significant, although recent inflation increases are not expected to alarm the RBI [7]