Reserve Bank Governor Sanjay Malhotra on June 6 announced rate cut of 50 basis points to propel economic growth against the backdrop of trade tensions triggered by Trump tariffs.
The Monetary Policy Committee (MPC), which consists of three RBI officials and three external members, cut the repo rate to 5.50%. It has now cut rates by 100 basis points in 2025, starting with a quarter-point reduction in February, its first cut since May 2020. It made a similar-sized cut in April.
Inflation has softened significantly, Malhotra said, adding that there is comfort on inflation aligning with the central bank's target of 4%. Core inflation is also expected to remain benign.
Will see how situation evolves in terms of liquidity; limited space for monetary policy action, said Governor Malhotra at the post-policy press conference in Mumbai.
Here are highlights from Malhotra's speech:
* RBI cuts FY26 CPI inflation forecast to 3.7% from 4.0% earlier; RBI cuts Apr-Jun CPI inflation forecast to 2.9% from 3.6% earlier
*Policy stance changed to neutral from 'accommodative'
*CRR cut by 100 bps of NDTL; CRR cut to accelerate monetary policy transmission; CRR cut to reduce cost of funding for banks; CRR cut to release Rs 2.5 lakh crore of liquidity
*Services activity should buoy urban demand; Rural demand steady, urban demand improving
*Stress in unsecured personal loan segment has abated; Stress seen in credit cards segment has abated; Stress seen earlier in retail segment loans has abated
*RBI retains FY26 GDP growth forecast at 6.5%; RBI retains Apr-Jun GDP growth forecast at 6.5%; RBI retains Jul-Sept GDP growth forecast at 6.7%; RBI retains Oct-Dec GDP growth forecast at 6.6%; RBI retains Jan-Mar GDP growth forecast at 6.3%
* Global backdrop remains weak. Last mile of disinflation more challenging
* The last mile of disinflation is turning out to be a little more protracted as growth inflation trade offs are becoming more challenging
* There is stability on all three fronts - price, financial and political
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