The RBI went on a rate cutting spree in 2025. 125 basis points slashed in a single year, bringing the repo rate from 6.50% all the way down to 5.25%. That’s the most aggressive easing cycle we’ve seen since the pandemic. But when the February 2026 MPC meeting came around, they hit pause. No cut. Status quo.
So the big question now is whether 5.25% is the bottom, or is there still room to go lower?
Those betting on more cuts have a solid case.
Inflation is sitting at 1.33% as of December 2025. That’s not just below RBI’s 4% target, it’s below even the lower tolerance band of 2%. When inflation runs this cold for this long, RBI historically has both the room and the reason to ease further. Bank of Baroda’s chief economist Dipanwita Mazumdar has forecasted repo touching 5% by the end of 2026. Elara Securities also projected another 50 bps of cuts, pointing to low inflation and strong public investment as enablers.
On the other hand, the “cycle is over” camp is getting louder and they’ve got strong arguments too.
HDFC AMC’s head of fixed income has gone on record saying further cuts are “far away, if any.” Kotak Mahindra Bank believes the cutting cycle is done. Bank of America actually flipped their February call from a 25 bps cut to a hold after the US India trade deal reduced growth uncertainty. Crisil’s Chief Economist Dharmakirti Joshi put it simply, saying RBI may prefer to “keep powder dry.”
And honestly, the reasons backing this view are hard to ignore. The rupee is hovering near ₹90 against the dollar. Government borrowing for FY27 is a massive ₹17+ lakh crore, which naturally puts upward pressure on yields. And RBI Governor Malhotra himself had signaled back in June that after 100 bps of cuts, “monetary policy is left with very limited space to support growth.” That’s about as direct as a central banker gets.
Then there are the wildcards that could swing things either way.
How the US India trade deal actually plays out on the ground. Where global oil prices go. Monsoon performance this year. And a big one that doesn’t get talked about enough: whether banks even fully pass on the existing 125 bps to borrowers. Because let’s be real, most of them haven’t done that yet.
So here’s what we want to hear from you.
Where do you think the repo rate lands by December 2026? Stays at 5.25%? Drops to 5%? Goes even lower? Or do you think there’s a chance RBI might actually have to hike if inflation makes a comeback?
And if you’re currently looking at a home loan or already have one, are you holding out hoping for further cuts, or do you think this is as good as it’s going to get?
Would love to hear your predictions and your reasoning. No wrong answers here, just a genuine discussion on where this is all heading.