Fri Feb 07 10:40:00 UTC 2025: ## RBI Cuts Interest Rates After Five Years, Boosting Economy Amidst Global Uncertainty
**Mumbai, India** – The Reserve Bank of India (RBI) has announced a 25 basis point reduction in interest rates, bringing the repo rate down to 6.25%. This marks the first rate cut in five years, a move analysts believe will stimulate the slowing Indian economy. The decision comes after the Monetary Policy Committee (MPC) meeting, the first under new RBI Governor Sanjay Malhotra and following Donald Trump’s inauguration as US President.
The rate cut aims to counteract the slowdown in GDP growth, projected to remain below 7% for the next fiscal year. The MPC anticipates growth of 6.6%, aligning with government projections. The reduction is expected to increase household disposable income by lowering mortgage payments, further aided by recent income tax revisions.
However, the full impact depends on commercial banks passing on the reduction to consumers. The RBI urged banks to actively participate in the call money market rather than holding funds passively, improving liquidity.
While the interest rate cut was the headline, the meeting also addressed other crucial aspects. Governor Malhotra reaffirmed the flexible inflation targeting framework and the central bank’s commitment to improving data analysis and forecasting.
The RBI acknowledged the rupee’s depreciation against the dollar and the decline in foreign exchange reserves, highlighting the external volatilities that influenced their cautious approach. Despite these challenges, the RBI reiterated its commitment to maintaining orderly and stable foreign exchange markets. The bank maintains a neutral policy stance, balancing the need for economic stimulus with global uncertainties.
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