RBI Monetary Policy Committee cuts Repo rate by 25 bps

STC NEWS MONITORING DESK
FEBRUARY 07 (STC): The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) decided to cut the repo rate by 25 bps for the first time in nearly five years and keep the monetary stance “neutral.”
RBI Governor Sanjay Malhotra announced the policy decision, citing inflation was aligning with the target. The MPC unanimously decided to cut rates and maintain the stance.

After keeping the benchmark repo rate unchanged at 6.5 per cent for the eleventh consecutive meeting, the RBI cut rates today in February 2025 meeting amid growing concerns about economic growth losing momentum and emerging signs of inflation approaching its 4 per cent target.
RBI cut benchmark rates for the first time in nearly five years. It had last reduced the repo rate by 40 basis points to 4 per cent in May 2020.

Key takeaways:

RBI bites the bullet, starts cutting rates:
Amid heightened global uncertainty, the central bank’s monetary policy committee unanimously decided to cut benchmark policy rates by 25 bps to 6.25 per cent from 6.50 per cent. The move was in sync with market expectations, as after the Budget 2025, expectations were high that the RBI would also take measures to address the challenge of economic growth losing steam.

Growth largely stable but needs focus:
Economic indicators appear to have dominated the minds of MPC members. While the central bank expects the real GDP growth for the next fiscal year (FY26) at 6.7 per cent, it highlighted the concerns due to global factors.
The RBI projected real GDP growth for 2025-26 at 6.7 per cent, with Q1 at 6.7 per cent (against 6.9 per cent projected earlier), Q2 at 7 per cent (from 7.3 per cent projected earlier), and Q3 and Q4 at 6.5 per cent each.

3.⁠ ⁠Inflation receding:
The RBI expects inflation to come down gradually near its target range of 4 per cent.

CPI inflation for 2024-25 is projected at 4.8 per cent, with Q4 at 4.4 per cent. Assuming a normal monsoon next year, RBI expects CPI inflation for 2025-26 at 4.2 per cent with Q1 at 4.5 per cent, Q2 at 4 per cent, Q3 at 3.8 per cent, and Q4 at 4.2 per cent.
(More details to follow)