RBI MPC cuts repo rate by 50 basis points to 5.5%, loans to become cheaper

STC NEWS DESK
MUMBAI, JUNE 06 (STC): In a significant move beyond expectations, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has cut Repo rate by 50 bps and has now changed its stance to ‘Neutral.’
With this cut in the policy rate, the loans are going to be offered at cheaper rates once the banks transmit this benefit to its borrowers.
The inflation outlook for the year has been revised downwards to 3.7%. GDP growth seen lower amidst global challenges.
“Global growth and trade projections have been revised downward. Growth-inflation trade-off becoming more challenging,” said RBI Governor Sanjay Malhotra. He added that Financial Stability a big challenge amidst global spillover and tech challenges posed by AI and other innovation.
In its last meeting in April, the RBI reduced the repo rate by 25 bps to 6 per cent from 6.25 per cent. This followed a similar 25 bps cut in February, bringing the rate from 6.5 per cent to 6.25 per cent. In the April review, the MPC had also decided to switch to an ‘accommodative’ stance from ‘neutral’.
The MPC meeting comes at a time when CPI inflation for the month of April, at 3.16 per cent, has entered into the 2-4 per cent medium-term target band of RBI. Meanwhile, India’s real GDP grew to a four-quarter high of 7.4 per cent in January–March. However, for the full year 2024-25, GDP growth is estimated to have slowed to a four-year low of 6.5 per cent, according to data from the National Statistics Office (NSO).
(STC)