By:- B.T Team
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– The Reserve Bank of India (RBI) reduced the repo rate by 25 basis points to 6.25% in February 2025, marking the first rate cut since May 2020.reuters.com
The Monetary Policy Committee (MPC) reached a unanimous decision to implement the rate cut, reflecting a cohesive stance on addressing economic challenges.
India's rate cut aligns with a global trend of central banks easing monetary policies to counter economic slowdowns, following similar moves by the Bank of England and the Bank of Mexico.
December 2024 saw retail inflation drop to a four-month low of 5.22%, creating a conducive environment for the RBI to consider a rate reduction.
Prior to the rate cut, the RBI reduced the cash reserve ratio (CRR) by 50 basis points to 4% in December 2024, aiming to boost liquidity in the banking system.
Financial markets had widely anticipated the 25 basis point rate cut, with experts predicting further measures to inject liquidity into the economy.
The weakening of the Indian rupee against the US dollar raised concerns about inflation, adding complexity to the RBI's decision-making process.
Global economic uncertainties, including trade tensions and slowing growth, influenced the RBI's decision to adopt a more accommodative monetary policy stance.