RBI MPC Cuts Repo Rate By 25 Basis Points, Governor Malhotra Cites Soft Inflation, GST Rate Cuts As Tailwinds

Quite in line with the expectations, the Monetary Policy Committee (MPC) headed by Reserve Bank of India (RBI) Governor Sanjay Malhotra, on Friday, reduced the repo rate by 25 basis points. Addressing the crucial meeting, Governor Malhotra said that the healthy manufacturing activity, Agri output and encouraging numbers reported by India Inc have provided tailwinds for a neutral policy stance.

Underlining that the core inflation projects are well within the RBI's stipulated limits, Malhotra said that there is space for a further cut in repo rate. “The MPC has unanimously reduced the policy repo rate by 25 basis points to 5.25% with immediate effect. Evolving geopolitical and trade environments continue to weigh on the outlook. While headline inflation remains above target in advanced economies, pressures in emerging markets are contained, allowing room for accommodative monetary policy. Global equity markets face conflicting pulls from AI‑fueled optimism and high valuations, with divergent central bank policies adding uncertainty to capital flows and yield spreads," Malhotra said.

The RBI's decision to reduce the repo rate down to 5.25%, comes on the backdrop of a series of cuts by the central band throughout 2025. Noting that reforms such as GST rate cuts have boosted the consumption in the economy, Malhotra said that the year gone by has been ‘satisfying’.  “The economy witnessed robust growth and benign inflation. Since the October policy, the Indian economy has witnessed rapid disinflation, with inflation dipping to a mere 0.3% in October 2025. Real GDP growth accelerated to 8.2% in Q2, aided by strong festive spending and rationalisation of GST rates. Inflation at a benign 2.2% and growth at 8% for the first half of the year presents a rare Goldilocks period,” he further added.

(This story is being updated)