RBI cuts repo rate to 5.25%; upgrades GDP outlook as liquidity boosts take centre stage

Economic Times
Economic Times 2M
The Reserve Bank of India reduced the repo rate to 5.25% and raised the GDP growth forecast for FY26 to 7.3%.
RBI cuts repo rate to 5.25%; upgrades GDP outlook as liquidity boosts take centre stage
A What happened
On December 8, 2025, the Reserve Bank of India (RBI) announced a 25 basis point cut in the repo rate, bringing it down to 5.25%. This decision was made by the Monetary Policy Committee after a three-day review and was accompanied by an upgrade in the GDP growth forecast for FY26 from 6.8% to 7.3%. The RBI cited broad-based economic momentum across various sectors as a reason for this optimistic outlook. Additionally, the central bank introduced liquidity measures, including open market purchases of government bonds worth ₹1 lakh crore, aimed at enhancing financial conditions and supporting economic growth. The RBI's actions are seen as a response to stable inflation and a need for improved transmission of previous rate cuts.

Why it matters

  • Repo Rate Cut: The RBI's repo rate was reduced to 5.25%, aiming to lower borrowing costs.

  • GDP Growth Forecast Increased: The GDP growth forecast for FY26 was raised to 7.3%, reflecting economic resilience.

  • Liquidity Measures Announced: The RBI announced open market purchases of ₹1 lakh crore to enhance liquidity.

Topics

Business & Markets Markets Economy

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