India Cuts Key Rates By 25 Bps

(RTTNews) - The Reserve Bank of India lowered its key interest rates on Friday as inflation is expected to ease more than expected on the exceptionally benign food prices.

The Monetary Policy Committee, led by Governor Sanjay Malhotra, unanimously decided to cut the repo rate by 25 basis points to 5.25 percent.

The bank had reduced the rate by 50 basis points in June and 25 basis points each in February and April.

"... the growth-inflation balance, especially the benign inflation outlook on both headline and core, continues to provide the policy space to support the growth momentum," the bank said.

The MPC also decided to continue with the neutral stance. However, Ram Singh was of the view that the stance be changed from neutral to accommodative.

Citing lower food prices, the bank downgraded its inflation forecast for the current fiscal year to 2 percent from 2.6 percent. Core inflation is expected to remain anchored in the period ahead.

Both headline and core inflation are expected to be around the 4 percent target during the first half of FY 2026-27.

Although external uncertainties pose downside risks to growth, the bank upgraded its real GDP growth outlook to 7.3 percent from 6.8 percent.

The RBI also decided to conduct OMO purchases of government securities of INR 1 trillion and a 3-year USD/INR Buy Sell swap of US$ 5 billion this month to inject durable liquidity into the system.