RBI Monetary Policy 2025: RBI slashes repo rate by 50 bps, shifts policy stance to 'neutral'
Synopsis
The RBI revised its inflation outlook for the year downward to 3.7%, citing a softening food inflation trend and a benign core inflation environment.
In a bold move that surpassed market expectations, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) on Friday (June 6, 2025) announced a 50 basis points cut in the repo rate, bringing it down to 5.5%. The decision comes as inflation continues to ease and global headwinds weigh on India's growth outlook.
This marks the third consecutive rate cut by the central bank in 2025. The RBI had previously reduced the benchmark rate by 25 bps each in February and April, taking it from 6.5% to 6.0% before Friday's sharper reduction. The MPC had also adopted an accommodative stance in April, signalling more support for economic growth.
The RBI revised its inflation outlook for the year downward to 3.7%, citing a softening food inflation trend and a benign core inflation environment. Consumer Price Index (CPI) inflation for April had already fallen to 3.16%, well within the RBI's medium-term target band of 2–4%.
However, the growth outlook remains cautious. Despite a strong Q4 performance—India's real GDP grew 7.4% in the January–March quarter—the full-year GDP growth estimate for FY25 has been lowered to 6.5%, a four-year low, according to the National Statistics Office (NSO).
Explaining the rationale behind the move, RBI Governor Sanjay Malhotra highlighted the resilience of the Indian economy amid global volatility. "India stands out for its strength, stability, and opportunities. We are supported by strong balance sheets across all five major sectors—corporates, banks, households, government, and the external sector," he said.
The RBI Governor added that India's macroeconomic environment remains stable on the price, financial, and political fronts, offering a conducive climate for policy continuity and investment. "In a dynamically evolving global economic order, India provides immense opportunities to both domestic and international investors," he noted.
