RBI Governor Sanjay Malhotra said on Friday that the Reserve Bank of India (RBI) has reduced its forecast for inflation for the financial year 2025-26 (FY 26). This will provide more relief in Indian homes.
reserve Bank of IndiaThe MPC of the Monetary Policy Committee stated that inflation has decreased and the financial year 2025-26 is likely to decrease further, mainly due to better food supply.
Malhotra said, “While food inflation remains soft, core inflation is also expected to move forward.”
“The Indian economy presents a picture of power, stability and opportunity,” he said. India is growing at a very fast pace and “aspirations to grow at a higher rate,” RBI governor Added.
The Reserve Bank of India also transformed its monetary policy stance from “adjustment” to “neutral”, which means it will now take a more balanced approach.
In its major decision of the day, MPC cut benchmark repo rate by 50 basis pointsBring it down to 5.5%. It marks the lowest repo rate in three years.
RBI cuts repo rate from 50 basis points
The RBI cut the 50 basis points in the benchmark repo rate by 5.5%, cut its third straight rate since February and brought the major lending rate to its lowest level in three years.
With a view to reviving the development, the step came amid signs of an economic recession, in which India’s GDP growth slipped up to 6.5% at a four -year low in FY 25. The repo rate, which is the rate at which banks borrow from RBI, were below this level on August 5, 2022 at 5.40%.
The RBI governor said, “After a detailed evaluation of the macroeconomic and financial development and economic approach to be developed, MPC decided to reduce the repo rate from 50 basis points.”
With this decision, RBI has now reduced the repo rate in a total of 100 basis points since February 2025. In its previous review in April, the Central Bank cut the rate of 25 basis points.
Malhotra said that the location for further cuts can now be limited. “After 100 BPS reduced repo in quick succession, there is a limited place to support development in monetary policy,” he said.
This is the first example after the Covid-19 epidemic that RBI has implemented three consecutive rate cuts.
On the economic front, Malhotra said that the forecast of actual GDP growth for FY26 is unchanged at 6.5%, Q1 with quarterly estimates of 6.5%, 6.7% in Q2, 6.6% in Q3 and 6.4% in Q4. “Risks are equally balanced,” he said.
Rate cuts are expected to reduce the cost of lending for homes, vehicles and commercial loans, which provides some relief to consumers and helps to encourage demand in areas.
