Economysummary
25 Bps In Feb, 25 in April, and Now 50 Bps – What's Behind RBI's Rate Cut Spree?
RBI’s 50 bps rate cut marks the third consecutive reduction in 2025, signalling a bold push for growth. With inflation under control and global headwinds mounting, the central bank has slashed rates by 100 bps since February. What’s driving this spree? Here’s a quick look.
From 6.5 to 5.5: What’s Driving RBI’s Aggressive Rate Cut Push?
New Delhi: The Reserve Bank of India (RBI) is on a rate-cut spree as it slashed the repo rate by 50 bps on Friday, bringing it to 5.5% from 6%. This marks the third straight rate cut this year as the apex bank announced a rate cut by 25 bps in February and 25 bps in April.
The rate cut announcement in February was fuelled by signs of slowing private consumption and weak external demand. The RBI decided to slash the rates amid global trade uncertainties and early indicators of industrial slowdown in India. The RBI had maintained a neutral stance, signaling cautious optimism.
In April, the RBI announced a further rate reduction by 25 bps as inflation remained within the comfort zone (well below 4%), while growth forecasts were being trimmed slightly due to weak export performance.
The move came against the backdrop of economists beginning to call for more aggressive easing as the US slowdown started impacting global capital flows and trade. The Central bank shifted from neutral to accommodative, signalling support for growth.
On June 6, RBI delivered a third and decisive rate cut, indicating a clear growth push amid rising fears of global recession. Softening of core inflation and domestic growth indicators pushed the RBI to go for the hat-trick of rate cuts.
What’s Driving the Spree?
- Low Inflation: Consistently below 4%, giving RBI room to boost growth without overheating prices.
- Global Slowdown: Weak US, Europe, and China growth impacting India’s exports.
- Credit Flow Needs: Sectors like MSMEs, housing, and infrastructure need cheaper loans.
- Job Creation & Demand: The government and RBI are aligning efforts to revive demand and generate employment.
From February to June 2025, the RBI has cut rates by 100 bps in total — a coordinated effort to navigate global economic headwinds while boosting domestic growth. With inflation in check, the central bank is clearly prioritising credit-led expansion and market stability.
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