RBI Repo Rate: RBI Monetary Policy: These 5 major factor rates are the reason for cuts
Indian Reserve Bank of India (RBI) Monetary Policy: Reserve Bank of India (RBI) Monetary Policy Committee (MPC) has decided to reduce the repo rate by 25 basis points for the first time in about five years. Keep the attitude of monetary policy “neutral”. Permanent deposit facility (SDF) rate is 6 %, marginal permanent facility (MSF) rate and bank rate 6.50 %.
RBI Governor Sanjay Malhotra announced a policy decision, saying that inflation is in line with the target. The MPC has unanimously decided to cut rates and continue the attitude.
“It has been decided to unanimously reduce the MPC policy by 6.50 percent. The RBI governor has also decided to maintain an MPC neutral attitude to support development and inflation.”
Begun
The Central Bank of India has reduced the rates at this 8 February 2025 conference, amidst the concern that the benchmark repo rates were kept at 6.5 percent in the continuous meeting, economic growth would decline at 6.5 percent.
RBI has cut benchmark rates for the first time in about five years. Last time in May 2020, the repo rate was reduced by 40 basis points.
RBI Policy: Important things
RBI should consider five important things with February policy decision:
Start reducing rates
Amid growing global uncertainty, the Monetary Policy Committee of the Central Bank has unanimously decided to reduce the benchmark policy rates by 25 basis points and reduce it by 6.50 %.
After Budget 2025, RBI is also in favor of market expectations, as there are high hopes that RBI is also taking steps to address the challenge of economic development.
Development is stable for the most, but ..
Financial indicators have determined the minds of MPC members. The Central Bank is estimating the actual GDP growth of the next financial year (FY26), highlighting concerns due to global issues.
The RBI has reduced the actual GDP growth from 6.6 % to 6.4 % for the final policy meeting in December.
The actual GDP growth for 2025-26 is estimated at 6.7 %. Q1 6.7 percent (in the last 6.9 percent), 7 percent in Q2 (already estimated 7.3 percent), Q3 and Q4 6.5 percent.
Inflation is decreasing
RBI hopes that inflation will gradually become close to 4 percent of its target limit. CPI inflation is 4.8 % for 2024-25, while Q4 is 4.4 %. RBI hopes that CPI inflation will be 4.5 percent in Q1, 4 percent in Q2, 3.8 percent in Q3 and 4.2 percent in Q2 for 2025-26.
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