In a surprise move reflecting concerns over sluggish economic momentum and subdued inflation, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points, bringing it down to 5.50%. This marks the 3rd consecutive rate cut by the central bank and the most aggressive easing step so far in 2025.
The decision was announced following the RBI’s second bi-monthly monetary policy meeting for FY26. The six-member Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, has now lowered policy rates by a cumulative 100 basis points this year.
Alongside the repo rate cut, the MPC shifted its policy stance from 'Accommodative' to 'Neutral', signaling a more balanced approach in future rate decisions. Additionally, the RBI reduced the Cash Reserve Ratio (CRR) by 100 basis points—from 4% to 3%—to infuse additional liquidity into the banking system.
Despite the rate cuts, the central bank maintained its GDP growth forecast for FY26 at 6.5%, suggesting confidence in underlying economic fundamentals.
On the inflation front, the RBI revised its CPI forecast for FY26 down to 3.7% from the earlier estimate of 4%. Notably, Q1 CPI inflation is now expected to be 2.9%, a sharp drop from the previous 3.6% forecast. Projections for Q2 have also been lowered to 3.4% (from 3.9%), while Q3 inflation has been slightly reduced to 3.8%, and Q4 remains steady at 4.4%.
Also Read :Best Investments for Monthly Income in India for June 2025
With inflation well below target and economic recovery still tentative, the RBI’s latest moves underscore its commitment to supporting growth while maintaining price stability.
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Published on: Jun 6, 2025, 10:59 AM IST
Sachin Gupta
Sachin Gupta is a Content Writer with 6+ years of experience in the stock market, including global markets like the US, Canada, and Australia. At Angel One, Sachin specialises in creating financial content that simplifies complex market trends. Sachin holds a Master's in Commerce, specialising in Economics.
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