RBI reduces repo rate to 6% as Trump's tariffs kick-in
What's the story
The Reserve Bank of India (RBI) has announced a cut in the repo rate, reducing it by 25 basis points (bps) from 6.25% to 6%.
The decision was taken unanimously by the Monetary Policy Committee (MPC), RBI Governor Sanjay Malhotra said.
The move comes amid an economic slowdown and is expected to make home loans cheaper for borrowers and improve liquidity for businesses.
Economic impact
US tariffs on Indian imports prompt rate cut
Donald Trump's 26% import tariff on Indian goods took effect at 9:30am today. Concerns over the potential fallout from these tariffs played a key role in the RBI's decision to lower interest rates.
The duties are projected to shave 20 to 40 basis points off India's GDP growth for FY 2025-26, potentially reducing it from the earlier estimate of 6.7% to nearly 6.1%.
Change in stance
RBI shifts monetary policy stance from 'neutral' to 'accommodative'
The RBI has shifted its monetary policy stance from 'neutral' to 'accommodative,' indicating a firmer push to support economic growth. This change leaves room for additional rate cuts if conditions warrant.
Today's move also marks the central bank's second consecutive rate cut in 2025. The first came in February, breaking a five-year pause, as the RBI responded to growing global headwinds and economic uncertainty.