RBI Cuts Repo Rate By 50 BPS Amid Falling Inflation; Check Key Insights
Updated: 6 Jun 2025 • 5:10 pm
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The Reserve Bank of India (RBI) has reduced the repo rate by 50 basis points amid falling inflation. It is the third consecutive rate cut this year, totalling a 100 basis point reduction since February 2025. Inflation in India stays below the central bank’s target of 4%. Thus, the consensus of economists led to the decision to cut the repo rate.
Reason Behind This Rate Cut
The Consumer Price Index (CPI) moderated to 3.2% in April, its lowest level since July 2019. Inconsistent decline in food prices resulted in this moderation. Economists say that since inflation has remained below the 4% target for three months in a row (February, March, and April), CPI must be kept permanently anchored to the 4% target for a 12-month horizon. Under the flexible inflation targeting (FIT) policy, the RBI is required to maintain the CPI at 4% with a +/-2% band. As per RBI's annual report 2024-25, "benign inflation scenario and moderate growth warrant monetary policy to be growth oriented, but keep watch on the rapidly evolving global macroeconomic situation with caution."
RBI MPC Decision: Key Highlights
CPI inflation for FY25- 26 is projected at 3.7%, revised downward from 4.0% in the MPC meeting in April. Here are the quarterly projections.
- Q1: 2.9%
- Q2: 3.4%
- Q3: 3.9%
- Q4: 4.4%
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