Will RBI MPC Implement a 25 Bps Rate Cut on June 6 as Inflation Declines?
Click to start listening
Synopsis
As the RBI MPC is poised to meet, analysts predict a third consecutive rate cut of 25 bps due to easing inflation. This decision could bolster domestic demand and enhance industrial activity. Stay tuned for insights on the implications of this potential cut on the economy.
Key Takeaways
- RBI MPC likely to cut rates by 25 bps.
- Inflation remains below 4 percent.
- Improving domestic consumption to support growth.
- Potential further cuts of 50 bps this fiscal year.
- RBI focused on liquidity management.
New Delhi, June 2 (NationPress) As the RBI’s Monetary Policy Committee (MPC) prepares to convene later this week, analysts forecast that the Central Bank will likely proceed with a third consecutive rate reduction of 25 basis points, given that inflation remains under the median target of 4 percent.
The Central Bank is anticipated to lower the repo rate by an additional 50 basis points (bps) this fiscal year (FY26), following a 50 bps cut made until April of this year.
Bank lending rates have started to decline, which is expected to boost domestic demand, according to a recent Crisil report.
“The uptick in domestic consumption is likely to bolster industrial activity. We predict that domestic consumption will improve, driven by robust agricultural growth, easing inflation encouraging discretionary spending, and income tax relief this fiscal,” it stated.
Madan Sabnavis, the Chief Economist at Bank of Baroda, commented, “Given the relatively favorable inflation conditions and the liquidity situation, which has been significantly improved through various measures by the RBI, we anticipate a 25 bps cut in the repo rate on June 6.”
The commentary on both growth and inflation will be crucial, as there are expectations for revisions in forecasts regarding both indicators.
“It is also expected that the RBI will provide insights on how the global landscape might impact the Indian economy, especially considering that the tariff reprieve from the USA will conclude in July,” Sabnavis added.
The Reserve Bank has indicated that it will continue to manage liquidity in alignment with its monetary policy stance to ensure adequate system liquidity meets the productive demands of the economy.
A favorable inflation outlook alongside moderate growth necessitates a monetary policy that is conducive to growth while remaining vigilant about the swiftly changing global macroeconomic landscape, according to the Central Bank’s ‘2024-25 annual report’.
During its April meeting, the RBI MPC unanimously voted to decrease the policy repo rate by 25 bps to 6.0 percent. Additionally, the MPC shifted its stance from neutral to accommodative.
Point of View
It is vital to remain focused on how the RBI's decisions affect the broader economy. The anticipated rate cut reflects a cautious yet optimistic approach to managing inflation and stimulating growth. The balance between inflation control and economic support will be pivotal in shaping the financial landscape in the coming months.
NationPress
25/07/2025
Frequently Asked Questions
What is the expected repo rate cut by RBI MPC?
Analysts expect a 25 basis points rate cut by the RBI MPC during their meeting on June 6, 2023.
Why is the RBI considering a rate cut?
The RBI is considering a rate cut due to inflation remaining below the median target of 4 percent and improving domestic consumption.
What impact will the rate cut have on the economy?
A rate cut is expected to lower bank lending rates, supporting domestic demand and industrial activity.
How has inflation been trending recently?
Inflation has been trending downwards, currently remaining below the 4 percent target, which is favorable for a rate cut.
What other measures is the RBI taking?
The RBI is managing liquidity to ensure it meets the productive requirements of the economy.
