India’s central bank cuts repo rate by 25 basis points to 6.00% as it shifts stance to support the economy.
The RBI rate cut came as expected, with the Reserve Bank of India trimming the repo rate by 25 basis points to 6.00%. This is the second consecutive cut following the February move and signals a clear shift in policy stance—from “neutral” to “accommodative.”
All six members of the Monetary Policy Committee (MPC) voted unanimously for the cut, showing a strong consensus on the need to stimulate the economy.
Why the RBI Rate Cut Happened
The RBI made this move to support slowing growth and counter rising global uncertainties. A major concern has been the recent U.S. tariff hikes, which are expected to dent India’s export growth.
Because of these risks, the central bank lowered India’s GDP growth estimate for FY2025 from 6.7% to 6.5%. That may not sound like much, but even a 20–40 basis point hit to growth can affect employment, investment, and consumer sentiment.
At the same time, the inflation picture looks stable. The RBI revised its inflation forecast down to 4.0% from 4.2%, giving it more room to cut rates without stoking prices.
U.S. Tariffs Add Pressure
The global outlook became more uncertain after the U.S. imposed new tariffs on several key imports. Indian exports could be directly hit, especially in sectors like steel, aluminum, and textiles.
Markets reacted quickly. Equity benchmarks dropped around 4% after the tariff news, and the RBI Governor acknowledged the downside risks. While he didn’t quantify the full impact, he made it clear that global headwinds are now front and center in RBI’s policy thinking.
Also Read: RBI’s 6 Money Meetings: Will 2025 Bring Relief or More Pain for Indians?
Market Reactions to RBI Rate Cut
The immediate market reaction was muted but telling:
- Bond yields on the 10-year dipped slightly to 6.50%, reflecting positive sentiment from the rate cut.
- The rupee weakened marginally to 86.61 against the dollar, likely due to risk-off sentiment and tariff concerns.
- Equity markets closed down by around 0.3%, with investors remaining cautious despite the RBI’s dovish tone.
What’s Next for RBI?
Analysts now expect more easing ahead. According to Kotak Mahindra Bank and other economists, the RBI could cut rates by another 75–100 bps in 2025 if global growth continues to weaken.
The shift to an accommodative stance opens the door for this. It signals that the RBI is willing to act again if needed—especially if the global slowdown intensifies or inflation remains benign.
Also Read: India GDP Growth Jumps to 6.7%—Rural Demand in Driver’s Seat
What This Means for You
A lower repo rate means cheaper loans for consumers and businesses. Home loans, auto loans, and corporate borrowing could all get more affordable. That’s good news for demand and investment in the economy.
At the same time, savers may see lower returns on fixed deposits and other interest-based products. It’s a trade-off aimed at boosting growth when inflation is under control.
Final Thoughts
The RBI rate cut shows that the central bank is ready to support the economy during uncertain times. With inflation low and global risks rising, the RBI is clearly prioritizing growth.
If U.S. tariffs continue to weigh on global trade, further cuts could follow. For now, businesses and consumers alike can take comfort in lower borrowing costs—and a central bank that’s willing to act proactively.
Also Read: Trump Plans New Tariffs on Medicines – What It Means for India
