The Reserve Bank of India’s rate-setting Monetary Policy Committee goes for a third policy rate cut by 50 basis points, as inflation continues to remain below the median target of 4 per cent, to push growth amid continued global uncertainty triggered by the US tariff moves. The new policy repo rate is 5.50%.The MPC started deliberations on the next bi-monthly monetary policy on June 4 and announced the decision on June 6 (Friday).RBI Governor Sanjay Malhotra said, "Global growth as well as tade projections have been revised downwards."India's central bank reduced the key interest rate (repo) by 25 bps each in February and April, bringing it to 6 per cent. The six-member MPC headed by RBI Governor Sanjay Malhotra also decided to change the stance from accomodative to neutral policy.The RBI has reduced the repo rate by 100 basis points since February 2025.In response to the 50-bps cut in the policy repo rate since February 2025, most of the banks have reduced their repo-linked external benchmark-based lending rates (EBLRs) and marginal cost of funds-based lending rate (MCLR).In its annual report released last month, the RBI said monetary policy is committed towards achieving durable price stability, which is a necessary prerequisite for high growth on a sustained basis.The Reserve Bank also said it will undertake liquidity management operations in sync with the monetary policy stance and keep system liquidity adequate to meet the needs of the productive sectors of the economy.Here are the key highlights from last month’s MPC:The Standing Deposit Facility (SDF) rate is now 5.25%The Marginal Standing Facility (MSF) and Bank Rate decreased to 5.75%.The RBI also changed its policy stance from 'accommodative' to 'neutral'.Also Read: RBI MPC meeting key highlights - From repo rate cut to growth push, here’s everything Sanjay Malhotra’s team rolled out Why rate cut?The RBI Governor has announced a rate cut in the MPC statement as global economic uncertainty increases due to recent trade tariff tensions, which have affected financial markets worldwide. Also, the Indian Meteoroligcal Department (IMD) has predicted more than normal monsoon this year, resulting in uncertainties in food inflation.Growth outlookIndia's GDP growth for 2025-26 was projected at 6.5%, continuing the previous forecast.The quarter-wise forecasts were:Q1: 6.5%Q2: 6.7%Q3: 6.6%Q4: 6.3%The Central Bank said that the nation's growth will be supported by government's capital spending and rural and urban demand. However, exports may suffer due to global slowdown, though services exports are expected to remain steady. The risks of the economy are evenly balanced.InflationIn the last MPC meeting, the inflation announcements were as follows: Headline CPI inflation went down from 5.2% in December 2024 to 3.2% in April 2025Food inflation reached a 21-month low of 3.8%Fuel inflation stayed in deflationThe Central bank stated that outlook for food inflation is looking good, thanks to record wheat harvest and strong pulse and kharif arrivals. Core inflation was largely stable and contained.The RBI said inflation risks are evenly balanced, but global uncertainty and weather changes may still pose risks.
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