Mumbai – The Reserve Bank of India (RBI) cut its repo rate by 50 basis points to 5.5% on June 6. This marks the third consecutive rate cut by the country’s central bank since February 2025.
According to Reuters, Sanjay Malhotra, the governor of the Reserve Bank of India, explained that the rate cut was necessary due to increasing global uncertainties and lower-than-expected economic growth in India. The central bank aims to stimulate domestic consumption and investment to accelerate economic growth.
The Economic Times of India reported that the rate cut comes amid steadily declining inflation in the country. The RBI’s inflation forecast for this year has been lowered from 4% to 3.7%. In April, India’s overall inflation rate dropped to 3.2%, the lowest in nearly six years and significantly below the central bank’s medium-term target of 4%. The RBI expects the overall inflation rate to align with its target and may remain “slightly below” the target level.
The RBI’s statement also noted that the early arrival of the monsoon season this year will ensure an adequate supply of major food crops. Combined with the weakening of commodity prices such as oil and the strengthening of the currency, the country’s inflation rate is expected to be contained in the coming months, allowing the central bank to maintain a relatively low repo rate.
The RBI stated that, given the limited scope for supporting economic growth through monetary policy, it has shifted its monetary policy stance from “accommodative” to “neutral.” The BBC reported that this indicates whether India will further cut interest rates will depend on the dynamic interplay between the country’s economic growth and inflation.
It is understood that the RBI has cut the repo rate by 25 basis points in February and April 2025, respectively. Since the beginning of this year, the RBI has cumulatively cut interest rates by 100 basis points.
Related Topics:
