The Reserve Bank of India’s (RBI) monetary policy committee shifted its policy stance to “neutral” from “accommodative” alongside a sharper-than-expected 50 basis point cut in the repo rate to 5.5 percent.
The decision came amid easing inflationary pressures and sustained economic growth, RBI governor Sanjay Malhotra said on June 6, announcing the MPC decisions.
“With inflation under control and growth on track, this calibrated shift in stance is aimed at maintaining macroeconomic stability while supporting growth in line with the vision of Viksit Bharat,” Malhotra said.
A “neutral” stance gives the RBI the flexibility to raise, reduce, or maintain interest rates in future policy meetings, depending on how macroeconomic conditions evolve.
An “accommodative” stance typically signals the central bank’s readiness to cut interest rates and inject liquidity to support growth, with rate hikes generally off the table.
The shift in stance to neutral means that the policy rates may possibly level off at 5.5 percent in the current cycle. "However, this would remain a moving target with incremental data points likely to shape the outcome," Rajeev Radhakrishnan, CIO- Fixed Income, SBI Mutual Fund, said.
Follow our live blog for the latest on RBI policy meeting
The move marks a reversal from the committee’s April stance when it adopted an accommodative approach to prioritise growth amid global uncertainties and easing inflation.
The shift in approach follows a decline in retail inflation, now trending well below the RBI’s medium-term target of 4 percent. The central bank also revised its inflation forecast for FY26 to 3.7 percent from 4 percent earlier.
It retained the GDP growth projection for the year at 6.5 percent, citing continued strength in economic activity.
The MPC’s decision surprised some market observers. In the Moneycontrol MPC poll, a majority of economists and bankers surveyed had anticipated a smaller 25 basis points cut.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
