Will RBI MPC Announce a Third Rate Cut as Inflation Remains Low?

New Delhi, June 4 (NationPress) The Monetary Policy Committee (MPC) of the Reserve Bank of India has commenced its meeting on Wednesday to deliberate on a potential cut in the repo rate. Economists and industry analysts predict that the Central Bank may implement a third reduction of 25 basis points, bringing the rate down to 5.75 percent.

Under the leadership of RBI Governor Sanjay Malhotra, the committee's decision is expected to be revealed on June 6. Previously, the Reserve Bank had already decreased the repo rate by 50 basis points during its last two monetary policy reviews, resulting in a revised rate of 6 percent.

Market observers are keenly monitoring developments for indications of a possible third rate cut, as there are rising expectations for additional monetary support aimed at stimulating domestic growth amid deteriorating global economic conditions.

The RBI's shift towards a more dovish stance is mainly influenced by two key macroeconomic factors: benign inflation and indications of a cyclical slowdown.

Headline CPI inflation has consistently remained below the RBI's medium-term target of 4 percent, while GDP growth appears to be softening due to external shocks, particularly arising from recent trade disruptions linked to US policies.

Numerous rating agencies and international organizations have downgraded their projections for India’s GDP growth in FY26. Although the RBI held its growth estimate at 6.5 percent in April, other analysts have adjusted their forecasts downwards to a range of 6.0 percent to 6.3 percent.

“The MPC has unmistakably transitioned from a neutral to an accommodative approach, signaling the RBI's intention to inject liquidity and bolster growth. This shift is further supported by the CPI inflation in April dropping to 3.2 percent, the lowest level since July 2019 and well within the RBI's comfort zone,” stated Bajaj Broking Research.

With inflation expectations stabilized, growth momentum decelerating, and ongoing external vulnerabilities, the environment appears increasingly conducive for another rate cut.

While the ultimate decision will hinge on evolving global conditions, particularly from advanced economies, market consensus is strengthening around the likelihood of a third rate cut to aid in sustaining India’s growth trajectory, according to the report.

A recent SBI report has even forecast a substantial 50-basis point rate cut in the forthcoming RBI MPC policy.

“Concerns regarding domestic liquidity and financial stability have diminished. Inflation is anticipated to remain within the tolerance band. Maintaining the domestic growth momentum should be the primary policy focus, justifying a significant rate cut,” remarked Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI.

With liquidity in a prolonged surplus state, liabilities are being repriced more swiftly during the current rate-easing cycle. Banks have already lowered interest rates on savings accounts to the minimum of 2.70 percent.

Furthermore, fixed deposit (FD) rates have been decreased by 30-70 basis points since February 2025. The transmission to deposit rates is expected to be robust in the upcoming quarters, according to the SBI report.