RBI Cuts Repo Rate, Signals a Goldilocks Economy for India
RBI Cuts Repo Rate, Signals a Goldilocks Economy for India
RBI trims policy rate by 25 bps to 5.25%, raises FY26 growth to 7.3% and lowers inflation to 2%, while injecting liquidity to sustain momentum.
MUMBAI: The Reserve Bank of India’s Monetary Policy Committee cut the policy repo rate by 25 basis points to 5.25% from 5.50%, while keeping a neutral stance. The central bank also raised the FY26 real GDP growth forecast to 7.3% from 6.8% and lowered the inflation projection to 2%. The RBI framed the moment as a rare Goldilocks period — one with benign inflation and solid growth that gives room to reinforce momentum.
To support liquidity and ensure bond market functioning, the RBI announced liquidity measures totaling approximately Rs 1.45 lakh crore, including Rs 1 lakh crore of bond repurchases and a three-year dollar–rupee swap worth $5 billion. The rupee showed some weakness, hovering around 89.8–90 per dollar as the policy action landed, but the central bank stressed it would monitor currency dynamics and maintain macro stability.
Governor Sanjay Malhotra noted that the inflation forecast for 2025-26 has been trimmed to 2%, helped by easing food prices and GST rationalisation, while growth forecasts were revised higher. He highlighted that the inflation story has been tempered by that half of the recent price rise came from precious metals, with external demand remaining weak and offsetting some of the domestic upside. Quarterly projections now show 7% for Q3 and 6.5% for Q4, with growth for the next financial year projected at around 6.7% and Q2 near 6.8%. GST cuts have supported overall demand, and rural demand has benefited from favorable monsoon prospects.
This rate cut marks the first move since February 2025 and signals the RBI’s intent to preserve momentum without derailing macro stability. The policy stance remains neutral, balancing room for further easing if needed with caution about external risks, including global trade tensions and currency volatility. Analysts said the move could help transmission to borrowers and spur credit growth, while reminding that the path ahead will hinge on how external demand evolves and how banks pass through the cut to consumers and businesses.
Cover image source: MPC cuts repo rate by 25 basis points to 5.25% 🔗
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