RBI's Hat-trick Rate Cut: Repo Rate Down To 5.5% As Inflation Falls To 3.7%, GDP Growth Steady At 6.5%

The Reserve Bank of India (RBI) has cut the policy repo rate by 50 basis points, bringing it down from 6% to 5.5%, as announced by Governor Sanjay Malhotra at the conclusion of the three-day Monetary Policy Committee (MPC) meeting held in Mumbai.

This marks the third consecutive rate cut in 2025, with earlier reductions of 25 basis points each in February and April. The latest decision reflects the central bank’s growing confidence in easing inflation trends and its shift toward a more accommodative monetary policy to support economic growth.

The RBI’s decision to cut the repo rate to 5.5% also brings changes to other key rates. The Standing Deposit Facility (SDF) rate is now adjusted to 5.25%, while the Marginal Standing Facility (MSF) rate and the Bank Rate have been revised to 5.75%, as announced by Governor Sanjay Malhotra.

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Alongside the rate adjustments, the RBI has maintained its FY26 real GDP growth forecast at 6.5%, with quarterly estimates at 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.

On the inflation front, the central bank now expects FY26 inflation to average 3.7%, lower than the earlier estimate of 4%, reflecting confidence in sustained price stability.

Inflation Eases Below RBI's Comfort Level

India's retail inflation (CPI) fell to 3.16% in April, down from 3.34% in March, and remains well below the RBI's target of 4%. The decline has largely been driven by softening food prices, and analysts expect inflation to stay within a manageable range in the coming months.

The RBI also highlighted the positive impact of a normal monsoon, which is crucial for the rain-fed agricultural sector, rural demand, and overall economic momentum.

Impact on Borrowers

With the repo rate now at 5.5%, borrowing costs are expected to drop further as banks pass on the benefit through lower lending rates. Several banks have already reduced their EBLRs (External Benchmark-based Lending Rates) and MCLR (Marginal Cost of Funds-based Lending Rate) in response to previous rate cuts, and today's move is likely to lead to cheaper EMIs for home, auto, and business loans.

RBI Signals Continued Support

Governor Malhotra said that while the global economic backdrop remains fragile, improving trade conditions and controlled domestic inflation provide space for policy support. "The uncertainty around the global outlook is still high but easing inflation gives us room to stimulate growth," he noted.

The current MPC comprises three RBI officials—Sanjay Malhotra, Deputy Governor M Rajeshwar Rao, and Executive Director Rajiv Ranjan—along with three external members: Nagesh Kumar, Saugata Bhattacharya, and Professor Ram Singh.

With inflation under control and growth priorities in focus, the RBI’s latest move reinforces its intention to boost credit growth and support economic recovery in 2025.