RBI Cuts Repo Rate to 6.25%

In a move that promises to make home loans and other borrowings cheaper, the Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6.25%. This decision comes in light of lower inflation and growth forecasts for FY26.

Revised Growth and Inflation Forecasts

The central bank has revised both the growth and inflation forecast for FY26 by 20 basis points to 6.5% and 4% respectively. The monetary policy committee (MPC) unanimously voted for the rate cut and changed the monetary policy stance from neutral to accommodative.

Governor's Statement on Policy Change

RBI governor, Sanjay Malhotra, explained the shift in stance, indicating that the MPC is now considering only two options moving forward: maintaining the status quo or further rate cuts. He cited a decisive improvement in the inflation outlook, supported by a sharp drop in food and global crude oil prices.

Impact of Global Factors

The governor highlighted the impact of global trade uncertainties and tariffs on the revised growth forecast. However, with record wheat production and higher pulses output, a durable softening of food prices is expected, further easing inflation pressures.