RBI Signals Growth Focus With 25 Basis Point Repo Rate Cut

New Delhi, Feb 7 (KNN) The Reserve Bank of India's Monetary Policy Committee (MPC) unanimously voted to reduce the policy rate by 25 basis points to 6.25 per cent in its first review of 2025, aligning with the government's recent budgetary relief measures.

The decision, announced on Friday by RBI Governor Sanjay Malhotra, also adjusts the Standing Deposit Facility rate to 6 per cent.

During the policy briefing, Governor Malhotra emphasised the dual mandate of the central bank, stating, "The interest of the economy demands financial stability and consumer protection. Our mandate at the RBI is to ensure both of them."

The MPC has maintained its neutral stance, prioritising the sustainable alignment of inflation with the target rate while supporting economic growth.

The economic outlook presents a mixed picture, with the National Statistical Office estimating real GDP growth at 6.4 per cent for the current year.

While agricultural activity remains robust and manufacturing shows signs of gradual revival in the second half of the year, urban demand continues to be subdued.

The services sector demonstrates resilience despite a decline in the Services PMI, and business expectations maintain an optimistic outlook.

Inflation has shown encouraging signs, with sequential moderation observed in November and December. The MPC projects inflation for 2025-26 at 4.2 per cent, assuming normal monsoon conditions.

This forecast is supported by anticipated easing of food inflation pressures due to favourable Rabi crop prospects, though core inflation is expected to rise while remaining moderate.

The central bank's decision comes against a backdrop of global uncertainties, including volatility in financial markets and trade policy concerns.

However, domestic factors such as tax relief measures in the Union Budget, moderating inflation, and efforts to improve employment conditions are expected to boost household consumption, potentially offsetting these external challenges.

(KNN Bureau)