RBI Set to Ease Rates: 25 bps Repo Rate Cut Expected as Inflation Cools

The Reserve Bank of India (RBI) is widely expected to cut its key repo rate by 25 basis points (bps) on June 6, 2025, responding to a sustained easing in inflation and supporting economic growth. This anticipated move comes as consumer price inflation in April dropped to 3.16%, its lowest level since July 2019, and well below the central bank’s 4% target.

 

Key Highlights

 

•⁠  ⁠Inflation Trend: India’s headline inflation has steadily declined, with April’s reading at 3.16% year-on-year, driven by softer food prices and stable fuel costs.

 

•⁠  ⁠Policy Response: The RBI’s Monetary Policy Committee (MPC) is set to reduce the repo rate from its current level, aiming to boost credit flow and stimulate economic activity.

 

•⁠  ⁠Economic Context: With inflation under control and growth showing signs of moderation, the rate cut is seen as a proactive measure to support consumption and investment.

 

•⁠  ⁠Market Impact: Lower interest rates are expected to benefit borrowers, including homebuyers and businesses, while maintaining financial stability.

 

Outlook

 

The forthcoming rate cut signals the RBI’s confidence in India’s inflation trajectory and its commitment to fostering economic growth. Analysts expect another possible rate reduction in August if inflation remains subdued, reinforcing a growth-supportive monetary policy stance.

 

Source: Reuters, MoSPI, Trading Economics