RBI MPC Meeting 2025: FY26 Inflation Target Cut To 3.75%, FY 26 GDP Estimate Unchanged At 6.5%

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) has decided to reduce the repo rate by 50 basis points to 5.5 per cent, Governor Sanjay Malhotra announced on Friday, June 6. Before the RBI's third repo rate cut today, RBI has lowered the rate to 6% from 6.25% in April, then to 6.25% from 6.5% in February.

The bank changed its financial year (FY26) inflation target reduced to 3.75% from 4%. THe bank changed its stance to Neutral from Accomodative.

After assessing the current and evolving macroeconomic situation, the MPC voted to reduce the policy repo rate by 50 basis points (bps) to 5.50 per cent with immediate effect. Consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.75 per cent. This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," read a press release by RBI om Friday

RBI fixed the standard deposit facility (SDF) rate to 5.25% in June from 5.75% in April, whereas the marginal standing facility (MSF) rate was changed to 5.75% from 6.25%.

RBI MPC Policy Stance Shift

RBI MPC had shifted to an 'accommodative' stance in June, which emphasised upon central bank's focus on supporting economic growth by lowering interest rates. A neutral stance indicates that the central bank may consider either an increase or a decrease in repo rates based on inflation and growth dynamics.

Reversal of accommodation stance indicates that the central bank is willing to control inflation through repo rate hikes in future and tightening of monetary policy.

India Inflation

RBI repo rate action has come amid the ongoing geopolitical uncertainty and stock market volatility due to trade tensions and global order. As the April month's retail inflation rate came to a six-year low mark of 3.16% in April from 3.34% in March, RBI is likely to focus on investment boost to catalyse economic growth. The present inflation rate in April is well below RBI's inflation target of 4%.

RBI Repo Rate Cut Expectations

The RBI MPC was expected to announce a 25 basis points repo rate cut for June, according to the GoodReturns survey of more than 42 economists. The RBI's expected repo rate cut followed declining inflation and favourable liquidity conditions. The GR poll also indicated that the RBI will revise its GDP growth target and CPI for FY26.

"We do believe that given the rather benign inflation conditions and the liquidity situation, which has been made very comfortable through various measures of the RBI, the MPC would go in for a 25 bps cut in the repo rate on the 6th," Madan Sabnavis, Chief Economist at Bank of Baroda, said.

Nearly 98% of 50 economists across India covered under the GR survey had expressed a possibility for a 25 bps rate cut by the central bank. However, a few economists suggested that the RBI will go for a 50 bps rate cut for June month.
The six-member monetary policy committee, led by Sanjay Malhotra, began on June 4 and concluded on June 6.