India’s economic landscape just got a major boost.
In a bold move to stimulate growth and revive private consumption, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points (bps) to 5.50% during its June 2025 Monetary Policy Meeting. This marks the second major rate cut since February 2025, signaling a strong push from the central bank toward growth-focused monetary easing.
What’s Behind the RBI Repo Rate Cut?
The Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra, convened from June 4 to 6, 2025, for its 55th meeting. After reviewing macroeconomic conditions, the committee opted for a frontloaded repo rate reduction of 50 bps. The standing deposit facility (SDF) now stands at 5.25%, and the marginal standing facility (MSF) and Bank Rate are adjusted to 5.75%.
💬 “Inflation has significantly softened while growth remains below aspirations,” the MPC noted, emphasizing the need to support economic momentum.
Inflation Outlook: Heading Below Target
India’s Consumer Price Index (CPI) inflation dropped to a six-year low of 3.2% in April 2025, driven by a consistent decline in food inflation. With core inflation remaining stable and fuel prices turning slightly inflationary due to LPG hikes, the overall trend remains positive.
Key highlights from the inflation outlook:
- CPI forecast for FY 2025-26: Revised down to 3.7%
- Q1 inflation: 2.9%
- Q2: 3.4%
- Q3: 3.9%
- Q4: 4.4%
The RBI attributes this optimism to:
- Record wheat and pulses production
- An above-normal monsoon forecast
- Easing international commodity prices
Despite this, the central bank remains cautious of weather-related risks and tariff uncertainties that could impact food and fuel prices globally.
Growth Outlook: Private Investment and Rural Demand to Drive Momentum
According to data from the National Statistical Office (NSO), India’s GDP grew 7.4% in Q4 of 2024-25, compared to 6.4% in Q3. The RBI expects this momentum to continue in FY 2025-26, projecting a full-year real GDP growth of 6.5%.
Quarter-wise projections:
- Q1: 6.5%
- Q2: 6.7%
- Q3: 6.6%
- Q4: 6.3%
Growth drivers for FY 2025-26 include:
- Higher capacity utilization
- Rising private consumption
- Boost in fixed capital formation
- Government capex push
- Strong rural activity due to a good monsoon
- Continued services sector growth
However, global geopolitical tensions and trade policy uncertainty remain key downside risks.
Shift in Policy Stance: From Accommodative to Neutral
With 100 bps of rate cuts delivered since February 2025, the RBI acknowledged that monetary policy space is narrowing. As a result, the MPC changed its stance to “neutral”, signaling a wait-and-watch approach going forward.
This shift implies that any future rate changes will depend on:
- Incoming inflation and growth data
- Evolving global economic conditions
- Domestic financial stability indicators
What’s Next?
The next MPC meeting is scheduled from August 4 to 6, 2025. Meanwhile, the detailed minutes of the June meeting will be published on June 20, 2025.
A Balancing Act Between Growth and Price Stability
The RBI’s June 2025 Monetary Policy signals a clear intent: revive growth without compromising inflation control. With inflation easing and GDP picking up, the central bank has taken a decisive step toward building economic momentum, especially amid global uncertainties.
As India navigates FY 2025-26, the focus will remain on monitoring the twin challenges of inflation management and growth revival. Stay tuned for more updates as the RBI continues to steer the Indian economy through dynamic global headwinds.
FAQs: RBI Monetary Policy June 2025
Q1. Why did RBI cut the repo rate by 50 bps in June 2025?
A: Due to slowing growth and easing inflation, the RBI made an aggressive rate cut to support the economy.
Q2. What is the new repo rate as of June 2025?
A: The new repo rate is 5.50%.
Q3. What changes were made to the CRR?
A: The Cash Reserve Ratio was cut by 100 bps to 3%, to be implemented in phases starting September 2025.
Q4. Has RBI changed its monetary stance?
A: Yes, the RBI changed its stance from ‘accommodative’ to ‘neutral’.
Q5. What is the outlook on inflation for FY26?
A: The CPI inflation forecast has been revised down to 3.7% for FY26.
Thanks for the update 👍