RBI MPC: Central Bank reduces interest rate by 25 basis points in nearly 5 years

The Reserve Bank of India has reduced interest rates for the first time in nearly five years. The Monetary Policy Committee (MPC) of the RBI unanimously decided to lower the policy rate by 25 basis points. As a result, the policy repo rate is now 6.25 percent, down from 6.5 percent.

Consequently, the standing deposit facility (SDF) rate is set at 6.0 percent, while both the marginal standing facility (MSF) rate and the Bank Rate remain at 6.5 percent.

The MPC also unanimously chose to maintain a ‘neutral’ stance, focusing on achieving a durable alignment of inflation with the target while also supporting economic growth.

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Following the most recent rate cut in May 2020, the rate was lowered by 25 basis points to 6.25%. The policy rate was raised by 25 basis points to 6.5% in February 2023, marking the most recent rate modification. While maintaining its prediction for 2024–2025 at 4.8%, the Reserve Bank has set retail inflation at 4.2% for the upcoming fiscal year starting in April.

Approximately 6.7% GDP growth is projected by the central bank for the upcoming fiscal year, Governor Sanjay Malhotra declared. Approximately 6.7% GDP growth is projected by the central bank for the upcoming fiscal year, Governor Sanjay Malhotra declared. 

CPI-based inflation declined to a four-month low of 5.22 percent in December, mainly on account of the easing of prices in the food basket, including vegetables. It was at 5.48 percent in November.

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