RBI Monetary Policy: Amid slowing growth and muted inflation, the Reserve Bank of India (RBI), in a surprise move, delivered a bigger-than-expected repo rate of 50 basis points on Friday, June 6. Marking a third straight cut, the six-member monetary policy committee (MPC), led by Governor Sanjay Malhotra, lowered the policy rate to 5.50%.
With today’s cut, the RBI MPC has reduced rates by 100 basis points in 2025, to provide support to the economy amid global headwinds such as trade war worries.
The RBI first delivered a quarter-point reduction in February, its first cut since May 2020. It made a similar-sized cut in April.
RBI MPC Meeting: 5 key takeaways
Let’s take a look at five key takeaways from RBI MPC’s June meeting:
1. Larger-than-expected cut, change in stance
Slowing down inflation allowed the RBI MPC to not only cut rates for a third consecutive time in June, but also deliver a larger-than-expected 50 bps reduction in the key repo rate.
Governor Malhotra said that after reducing repo by 100 bps in quick succession, the monetary policy is left with limited space to support growth.
Meanwhile, the MPC revised its stance to ‘neutral’ from ‘accommodative’. RBI Governor added that from now MPC will carefully assess income data and the evolving outlook to chart out future policy.
2. Inflation forecast lowered
As RBI Governor Sanjay Malhotra signalled comfort on inflation and said core inflation is expected to remain benign, he lowered the CPI outlook for the financial year 2024-26 to 3.7% from 4% projected earlier.
The RBI has made adjustments to its quarterly inflation forecasts. It raised the CPI projection for Q1 FY26 to 3.9% from 3.6%, while lowering the forecast for Q2 to 3.4% from 3.9%. For Q3 FY26, the inflation outlook was slightly increased to 3.9% from 3.8%, and for Q4, it was revised upward to 4.4% from 4.2%.
3. Growth outlook maintained
The RBI, in its second policy meeting of FY26, maintained the real GDP growth at 6.5%. The RBI Governor maintained the growth forecasts for all its quarters as follows: Q1 FY26 at 6.5%, Q2 FY26 at 6.7%, Q3 FY26 at 6.6%, and Q4 FY26 at 6.3%.
The Indian economy has been resilient in the face of geopolitical risks, with GDP growth surging to 7.4% in the January-March quarter. India is already growing at a fast pace, but aspires to grow at a higher pace, Malhotra said.
