RBI Posited for a Third Interest Rate Reduction: Three Grounds Supporting a Foreseen 0.25% Decrease According to Economists
The Reserve Bank of India (RBI) has kicked off its three-day Monetary Policy Committee (MPC) meeting on June 4, 2025, with a shocking announcement on the horizion. Economists from prominent institutions like Bank of Baroda, CareEdge Ratings, and others predicted a 25 basis points rate cut, but the RBI delivered a surprise 50 basis points reduction.
When, Where, and How to Catch the Announcement
The final policy decision, including the inflation and GDP outlook, will be announced by RBI Governor Sanjay Malhotra on June 6, 2025, at 10 am. You can tune in to TV channels such as Bloomberg TV India, NDTV Profit, or CNBC-TV18 to catch the live announcement.
Who's on the RBI MPC June 2025 Lineup
Comprising of RBI Governor Sanjay Malhotra, Deputy Governor M Rajeshwar Rao, Executive Director Rajiv Ranjan, and external members Nagesh Kumar, Saugata Bhattacharya, and Professor Ram Singh, the six-member MPC is gathered to discuss the current economic state, overall inflation, steady GDP growth, and global trade uncertainties.
RBI MPC Meet June 2025: What Analysts Expect
While Bank of Baroda foresees a "hat-trick" of rate cuts along with a slightly downward revised inflation forecast for FY26, CareEdge Ratings expects more easing. However, ICRA warns that the RBI rate cut could be limited by tariff-led uncertainty.
Global Risks and Currency Outlook
The global trade environment remains volatile, with the US imposing higher tariffs on imports and trade tensions between the US and China posing risks. Although a temporary truce has been reached, recent accusations threaten renewed conflicts. Cooling inflation in the US raises hopes of rate cuts starting September 2025.
India's GDP Growth Outlook in FY26
The Indian rupee appreciated by 1.3 percent since the last policy but weakened again in May. The RBI will be closely monitoring the interplay of US dollar strength, safe-haven demand, and trade tensions to predict the rupee's movement.
Wide-Ranging Disinflation and the Impact on Monetary Policy
Retail inflation has eased to 3.2%, its lowest level since July 2019, marking the third consecutive month below the RBI's 4% target. With this widespread disinflation across multiple consumer segments, the favourable backdrop for further monetary easing has been established. However, risks such as slow private investment, patchy rural demand, and weak global demand must be considered.
In summary, the June 6 policy outcome will offer valuable insights into the RBI's roadmap for FY26, particularly amid rising uncertainty in the global trade environment and the approaching US tariff deadline on July 9.
Sources:
- RBI Cuts Repo Rate by 50 basis points to 5.5%, Injects Liquidity into the System - The Economic Times
- RBI Cuts Repo Rate by 50 bps to 5.5%, Carves Out Neutral Policy Stance - Livemint
- RBI Cuts Repo Rate by 50 bps to 5.5%: Here's What It Means for You - Innov8 CoWork
- RBI MPC Meeting: Key Takeaways and Implications for Markets - MoneyControl
- The surprise 50 basis points rate cut by the Reserve Bank of India (RBI) has opened up opportunities for various investment strategies in the banking sector.
- The RBI's decision to inject liquidity into the system could potentially reduce borrowing costs for businesses, boosting the overall financial environment.
- With global economies grappling with inflation, the disinflation seen in India could attract foreign investment in areas like the Defi market and other sectors seeking lower-risk investments.
- As the US prepares for potential rate cuts in September 2025, a synchronous easing approach by major central banks, like the RBI, could redefine the global investment landscape.
- Monitoring the RBI's monetary policy decisions, along with global trade uncertainties, has become crucial when considering investment strategies in the banking, finance, and business sectors.
