RBI cuts rates in June for third meeting in a row

Bank chops more than expected: At its meeting on 6 June, the Reserve Bank of India (RBI) cut its policy repo rate by 50 basis points to 5.50%. This came after the 25 basis point reductions made by the RBI in its prior two meetings. The cut was sharper than expected by the market.

Cooling food price pressures drive decision: A significant softening in inflation drove the Central Bank's decision, with the April reading cooling to a nearly six-year low as strong harvests eased food prices. The RBI noted that this year’s monsoon has started early, pointing toward another strong crop this year and reaffirming the Bank’s projection for price pressures to align with the 2.0–6.0% target in the medium term. The RBI also reduced its inflation forecast for this fiscal year from 4.0% to 3.7%.

RBI shifts monetary policy stance: The Central Bank shifted its monetary policy stance from accommodative to neutral, indicating limited room for further easing ahead after June’s strong cut. The move caught market analysts off-guard, as the RBI had made the reverse move only two months ago. A slight majority of our panel expects the RBI to trim rates by another 25 basis points by the end of the fiscal year ending in March 2026. Much will depend on how U.S. tariffs affect GDP growth, and how this year’s monsoon influences harvests and food cost pressures. The next meeting is set for 6–8 August.

Panelist insight: Goldman Sachs analysts commented: “With the change in stance, the RBI has signaled the end of the easing cycle, in our view. This was corroborated by the press conference, and the policy statement which stated that after today's easing, "monetary policy is left with very limited space to support growth”.” ING’s Deepali Bhargava is more dovish: “The RBI is signalling a pause, but it’s leaving the door open for more easing if growth or inflation weakens further […]. Our own GDP growth estimates are slightly weaker than the RBI’s, and with real policy rates still sitting well above historical norms, we continue to expect one 25bp rate cut from the RBI later this year, likely in [October–December].”

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