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Rate cut: Policy transmission is key
Financial Express Pune
|June 10, 2025
RBI MAY WAIT FOR US FED BEFORE ANY FURTHER EASING
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In a surprise move, the Monetary Policy Committee (MPC) cut the repo rate by a larger-than-expected 50 basis points (bp) to 5.5% and reduced the CRR by 100bp, frontloading both rate cuts and liquidity support. These steps should aid monetary transmission. However, with limited room left for further easing, the RBI shifted its policy stance from 'Accommodative' to 'Neutral'.
This could mark one of the shallowest easing cycles, totaling just 100bp, potentially insufficient to revive demand amid weak fiscal and export support. While the RBI lowered its FY26 CPI forecast by 30bp to 3.7%, it maintained the real GDP growth estimate at 6.5%, indicating no improvement over FY25. We still think more rate cuts can happen, but that may have to wait for further easing by the Fed. The Fed-RBI policy rate gap has now narrowed substantially.
Repo rate cut by 50bp; stance changed to 'Neutral'
This story is from the June 10, 2025 edition of Financial Express Pune.
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