YES Bank Outlook for Stability
YES Bank states the RBI's rate cut cycle has ended at 5.25%, with inflation set to rise soon from current lows. Rates will likely stay steady to manage prices and support growth amid stable markets.
MARKET NEWS
12/20/20251 min read
Following the most recent 25 basis point drop to 5.25% on December 5, 2025, YES Bank economists have proclaimed the RBI's cycle of rate cuts to be over, citing an upcoming increase in inflation that will prevent further easing. The bank sees policy rates stabilizing to anchor expectations because CPI inflation has been hanging at 2% recently but is expected to increase near the 4% objective in FY26, owing to normalized food prices and global commodity pressures.
Key Drivers Behind the Call
With four cuts totaling 175 basis points since February, YES Bank's stance is in line with the general opinion that the easing cycle has peaked amid strong Q2 GDP growth of 8.2% and mild inflation of 0.71% in November. Despite market bets on one more cut, economists like Indranil Pan observe ongoing economic slack but expect core inflation to firm, leading the RBI to halt.
Inflation Trajectory Ahead
The RBI lowered its FY26 CPI projections to 2.0–2.6%, although organizations like Crisil and Axis Bank anticipate a recovery to 2.5–4% as wholesale prices turn around and food inflation lessens. The end of aggressive reduction is indicated by this upward pressure and the possible effects of US tariffs.
Market Policy and Implications
While keeping an eye on global threats, the position stays neutral and supports growth at 7%+ for FY26. Although borrowers currently enjoy lower loan costs, bond yields may rise if inflation unexpectedly rises, and fixed deposit rates may stabilize.