India Central Bank Cuts Key Rate For First Time In Nearly 5 Years

(RTTNews) - The Reserve Bank of India reduced its key interest rates for the first time in nearly five years with an aim to boost economic growth.

Under the leadership of newly appointed Governor Sanjay Malhotra, the Monetary Policy Committee decided to reduce the policy repo rate by 25 basis points to 6.25 percent from 6.50 percent.

This was the first reduction since May 2020. Markets widely expected today's rate cut.

The bank maintained its inflation forecast for 2024-25 at 4.8 percent. For 2025-26, inflation was projected at 4.2 percent.

The committee observed that continued uncertainty in global financial markets together with volatility in energy prices and adverse weather events poses upside risks to the inflation trajectory.

The bank projected the economy to grow 6.7 percent in the FY 2025-26, which was slightly up from 6.6 percent estimated growth for 2024-25.

The growth-inflation dynamics open up policy space for the MPC to support growth, while remaining focussed on aligning inflation with the target, Malhotra said.

The MPC unanimously voted to continue with a neutral stance. This will provide MPC the flexibility to respond to the evolving macroeconomic environment, the banker added.