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RBI slashes key interest rate by 25 basis points to support economy amid tariff blitz
Public Lokpal
April 09, 2025
RBI slashes key interest rate by 25 basis points to support economy amid tariff blitz
New Delhi: The Reserve Bank of India (RBI) cut interest rates on Wednesday for a second consecutive time and signalled more easing to come as it sought to bolster the economy in face of further pressure from damaging US tariffs.
The Monetary Policy Committee (MPC), consisting of three central bank members and an equal number of external members, voted unanimously to cut the repurchase or repo rate by 25 basis point to 6 per cent. It had reduced rates by an equal measure in February -- the first cut since May 2020.
The move lowers borrowing costs to the lowest level since November 2022, amid easing inflation and a fall in oil prices.
RBI changed its policy stance to "accommodative" from "neutral", indicating possibility of more rate cuts in future, Governor Sanjay Malhotra said announcing the MPC decisions.
The rate cut came on a day when the full 26 per cent additional tariffs on Indian goods exported to the US came into effect. The US tariffs exacerbate uncertainties, with some economists predicting a 20-40 basis point drag on Indian GDP growth in the current fiscal year that started on April 1.
RBI too lowered its estimate for economic growth to 6.5 per cent for 2025-26 fiscal year from 6.7 per cent earlier. The inflation projection was also lowered to 4 per cent from 4.2 per cent, keeping it within the target range of 2-6 per cent.
The Indian economy grew by 6.5 per cent in the fiscal year ended March 31 (2024-25), its weakest pace since the pandemic.
The new governor cut rates in his debut policy meeting in February, and has injected more than USD 80 billion into the banking system in the last two months.
Lower interest rates provide relief to businesses and consumers alike, potentially spurring credit demand, investments, and job creation.
PTI
