The RBI reduces the repo rate to 5.50%, marking a total cut of 100 basis points in 2025. With inflation at 3.16%, RBI aims to support India’s economic growth.
The Reserve Bank of India (RBI) cut its key repo rate by a larger-than-expected 50 basis points to 5.50%, RBI governor Sanjay Malhotra announced on Friday after the Monetary Policy Committee (MPC) meeting.
This was a third consecutive reduction, as muted inflation provided space for policymakers to focus on supporting economic growth.
It has now cut rates by 100 basis points in 2025, starting with a quarter-point reduction in February, its first cut since May 2020. It made a similar-sized cut in April.
Inflation has softened significantly, Sanjay Malhotra said, adding that there is comfort on inflation aligning with the central bank’s target of 4%. Core inflation is also expected to remain benign.
India is already growing at a fast pace but aspires to grow at a higher pace, Malhotra said.
Retail inflation has slowed more quickly than expected in recent months and dropped to a near 6-year low of 3.16% in April, sharply below the RBI’s medium-term target of 4%.
India’s economy has been resilient, with GDP growth surging to 7.4% in the January-March quarter.
Real GDP growth
Sanjay Malhotra said, “Real GDP growth rate for this year 2025-2026, is projected at 6.5%, continuing with our earlier forecast, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.4%. The risks are evenly balanced.”
The article originally appeared on Hindustan Times
