Financial News: India Cuts Key Rates By 50 Bps; Shifts

India Cuts Key Rates By 50 Bps; Shifts Stance To Neutral

06/06/2025 - 01:57:00 (RTTNews)

(RTTNews) - India's central bank lowered its interest rates by 50 basis points on Friday, marking the third consecutive reduction and also shifted its monetary policy stance to neutral. At the three-day meeting, the Monetary Policy Committee of the Reserve Bank of India, led by Governor Sanjay Malhotra, decided to cut the policy repo rate by 50 basis points to 5.50 percent.

Markets anticipated only a quarter point reduction. The bank has reduced the repo rate by 25 basis points each in February and April.

Five members of the MPC voted to cut the rate by 50 basis points, while one member called for a quarter-point reduction.

"After having reduced the policy repo rate by 100 bps in quick succession since February 2025, under the current circumstances, monetary policy is left with very limited space to support growth," the bank said.

"Hence, the MPC also decided to change the stance from accommodative to neutral," RBI added.

The governor said the changes in growth-inflation dynamics call for not only continuing with the policy easing but also frontloading the rate cuts to support growth. Malhotra said, ".today's monetary policy actions should be seen as a step towards propelling growth to a higher aspirational trajectory."

In order to provide durable liquidity, the MPC decided to reduce the cash reserve ratio by 200 basis points to 3.0 percent.

The bank today downgraded its inflation forecast for the current financial year to 3.7 percent from 4.0 percent. Real economic growth for 2025-26 was projected at 6.5 percent, which was unchanged from the previous outlook.

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