RBI Announces 50 Basis Points Repo Rate Cut to 5.5%, Shifts to Neutral Stance
The Reserve Bank of India (RBI) has reduced the policy repo rate by 50 basis points to 5.5%, effective June 6, 2025. This marks the third consecutive rate cut this year, totalling a 100 basis point reduction since February.
Along with the repo rate, the standing deposit facility (SDF) rate under the
liquidity adjustment facility (LAF), the marginal standing facility (MSF) rate and the Bank Rate were adjusted as follows.
|
Standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) |
5.25% |
|
Marginal standing facility (MSF) rate and the Bank Rate |
5.75% |
The MPC also changed policy stance from 'accommodative' to 'neutral'.
RBI Governor, Sanjay Malhotra, announced this decision in the Monetary Policy Committee (MPC) 55th meeting held from June 4 to 6, 2025. The objective is to balance economic expansion with inflation control.
CPI inflation for FY 2025–26 is now projected at 3.7%, revised downward from 4.0% as projected in the April MPC meeting. The following are quarterly projections:
- Q1: 2.9%
- Q2: 3.4%
- Q3: 3.9%
- Q4: 4.4%
How the markets react to the repo rate cut?
Following the announcement, the benchmark indices surged:
- Nifty 50 crossed the 24,900 mark.
- BSE Sensex rose to 82,022, as of 10:49 AM.
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