RBI Policy Rate Cut To Boost Growth As Inflation Eases: Report

The decision of the Reserve Bank of India (RBI) to slash the policy rate will boost growth amidst easing price pressures and infuse liquidity along with supporting credit flow, said a report by Bank of Baroda.

The BoB report added that the RBI’s surprise 50 basis-point rate cut, along with a phased 100 basis-point reduction in the Cash Reserve Ratio (CRR), has signalled a strong pro-growth stance.

The announcements have been welcomed by markets and are expected to spur economic activity in the coming quarters.

The Monetary Policy Committee (MPC) maintained its GDP growth forecast for FY26 at 6.5 per cent. The RBI revised the inflation projection downward to 3.7 per cent, highlighting its confidence in the current macroeconomic environment.

On June 6, RBI’s Monetary Policy Committee (MPC) reduced the policy repo rate under the Liquidity Adjustment Facility by 50 basis points to 5.5 per cent.

Consequently, the Standing Deposit Facility Rate, which is the SDF Rate, shall stand adjusted to 5.25 per cent, and the Marginal Standing Facility MSF Rate and the Bank Rate shall stand adjusted to 5.75 per cent.

“These measures are expected to boost growth amidst easing price pressures and infuse liquidity along with supporting credit flow,” the report added.

“In the coming week, focus would shift towards the US Fed, wherein a pause is expected, especially since the labour market has been signalling some strength,” the report added.

India’s monetary move comes against a backdrop of renewed optimism in the global economy, as the United States and China begin working towards concluding new trade terms.

The report added that global central banks have adopted a watchful stance, closely monitoring the inflation risks with growth.

“Global central banks closely monitored the evolving dynamics between growth and inflation,” the report added.

The European Central Bank (ECB) recently cut rates by 25 basis points.

As per the report, the attention now turns to the US Federal Reserve, which is widely expected to pause its rate changes given recent labour market resilience.

“In the coming week, focus would shift towards the US Fed, wherein a pause is expected, especially since the labour market has been signalling some strength,” the report added. (ANI)