RBI Poised For Third Consecutive Rate Cut Amid Easing Inflation And Growth Concerns

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The Reserve Bank of India’s Monetary Policy Committee (MPC) is set to announce its policy decision on June 6, with expectations of a third consecutive repo rate cut. Analysts anticipate a 25-basis-point reduction, bringing the rate down to 5.75 percent, as the central bank aims to support economic growth amid global trade uncertainties and subdued inflation.

Key Highlights Of RBI’s Expected Rate Cut
- The repo rate is likely to be reduced by 25 basis points, marking the third consecutive cut this year
- Inflation has remained below the 4 percent target for three months, providing room for further monetary easing
- GDP growth for the first quarter of FY26 is expected to fall short of forecasts, reinforcing the need for accommodative policy
- Liquidity conditions remain comfortable, with surplus core liquidity following the RBI’s record dividend transfer
- Market participants are closely watching the central bank’s guidance on future rate cuts and global economic trends

Factors Driving The Rate Cut Decision
The RBI’s decision is influenced by multiple factors, including easing inflation, mixed growth signals, and global trade uncertainties. Retail inflation eased to 3.2 percent in April, the lowest since July 2019, allowing the central bank to focus on growth support without risking price stability. Additionally, GDP growth has moderated, prompting concerns about demand recovery.

Impact On Borrowing And Investments
A rate cut would lower borrowing costs for businesses and consumers, potentially boosting credit demand and market sentiment. Sectors such as MSMEs, affordable housing, and healthcare are expected to benefit from reduced interest rates, while bond markets may see higher returns due to lower yields.

Future Outlook And Policy Guidance
- Analysts predict the repo rate could fall to 5.5 percent by the end of the easing cycle, marking one of the shortest rate-cut phases in a decade
- The RBI may revise its inflation forecast downward, reinforcing expectations of further rate cuts later in the year
- Market participants will closely track the central bank’s commentary on global economic trends and liquidity management measures

Sources: CNBC-TV18, Financial Express, The Hindu Business Line, MSN.