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RBI MPC Meeting April 2025: Repo Rate Slashed to 6% Amid Global Trade Tensions

Discover the latest from the RBI MPC Meeting April 2025! Governor Sanjay Malhotra cuts repo rate to 6%, shifts stance amid Trump tariffs

On April 9, 2025, the Reserve Bank of India (RBI) made headlines with its first monetary policy announcement of the fiscal year 2025-26. Led by Governor Sanjay Malhotra, the Monetary Policy Committee (MPC) unanimously decided to cut the repo rate by 25 basis points, bringing it down to 6% from 6.25%. This move, effective immediately, marks the second consecutive rate cut in 2025 and signals a shift in the RBI’s stance from "neutral" to "accommodative." But what’s driving this decision, and how does it affect you? Let’s dive into the details of this pivotal meeting held from April 7-9, 2025, against the backdrop of escalating global trade tensions and Donald Trump’s tariff policies.

Why the Repo Rate Cut? A Response to Cooling Inflation and Global Uncertainty

The RBI’s decision to lower the repo rate—the rate at which it lends to commercial banks—comes as a strategic move to boost economic growth amid a slowing global economy. Governor Malhotra highlighted that headline inflation has been easing in recent months, giving the central bank room to pivot toward supporting growth. The MPC projects inflation for FY26 at 4.2%, with quarterly estimates ranging from 3.8% to 4.5%, assuming a normal monsoon. This moderation in inflation, coupled with a positive outlook for food prices, has bolstered confidence in maintaining price stability.

However, the global landscape tells a different story. The announcement follows heightened trade frictions, particularly after U.S. President Donald Trump imposed a 26% reciprocal tariff on Indian imports—half the rate India levies on U.S. goods—alongside a 10% baseline tariff on all trading partners. These measures, announced on April 2, 2025, have sparked fears of a global recession, with experts warning of a potential 20-40 basis point hit to India’s GDP growth. In response, the RBI has trimmed its FY26 GDP growth forecast from 6.7% to 6.5%, reflecting the anticipated drag from weaker net exports.

A Shift to Accommodative Stance: What It Means

For the first time since February 2025’s rate cut (when the repo rate dropped from 6.5% to 6.25%), the RBI has shifted its monetary policy stance to "accommodative." This change signals a willingness to further ease borrowing costs if needed, prioritizing economic stimulus over inflation control in the short term. The Standing Deposit Facility (SDF) rate now stands at 5.75%, while the Marginal Standing Facility (MSF) and Bank Rate are adjusted to 6.25%.

Governor Malhotra emphasized the "anxious note" on which FY26 has begun, pointing to trade tensions unsettling the global community. "Some concerns of trade friction are coming true," he noted, underscoring the RBI’s proactive approach to cushion India’s economy from external shocks.

Key Highlights from the MPC Meeting

  • Repo Rate Cut: Reduced by 25 basis points to 6%, effective immediately.
  • GDP Growth Forecast: Revised down to 6.5% for FY26 (Q1: 6.5%, Q2: 6.7%, Q3: 6.6%, Q4: 6.3%).
  • Inflation Outlook: Projected at 4.2% for FY26, with risks evenly balanced.
  • Policy Stance: Shifted to "accommodative" from "neutral" to support growth.
  • Global Context: Trump’s tariffs and a potential U.S./global recession cited as key concerns.

What Does This Mean for You?

For the average Indian, this rate cut could translate into lower borrowing costs. If you’re planning to take a home loan, car loan, or personal loan, expect banks to gradually pass on the benefits, potentially reducing your EMIs. Businesses, too, may find it easier to access credit, spurring investment and job creation. However, savers might see slightly lower returns on fixed deposits as interest rates adjust downward.

On the flip side, the RBI’s focus on global risks—like Trump’s tariffs and a possible slowdown in exports—hints at challenges ahead. A weaker rupee (recently hitting record lows) could drive up import costs, nudging inflation in sectors like fuel and electronics. The central bank’s accommodative stance aims to strike a balance, ensuring growth doesn’t stall while keeping inflation in check.

Expert Takes: A Shallow Rate Cut Cycle Ahead?

Analysts see this as the start of a cautious easing cycle. "The RBI is responding to both domestic and global cues," said an economist cited in the Times of India live blog. With inflation trending toward the 4% target and growth facing headwinds, another 25-basis-point cut could be on the table by June 2025, depending on liquidity conditions and global developments. However, a deeper 50-basis-point cut seems unlikely in the near term, given the uncertainty surrounding trade wars and commodity prices.

Looking Ahead: India’s Economic Resilience Tested

Governor Malhotra remains optimistic about India’s domestic fundamentals, noting that urban consumption is picking up and manufacturing activity is reviving. Yet, the shadow of Trump’s tariffs looms large. As China threatens retaliation and global markets brace for volatility, the RBI’s proactive measures—like this rate cut and potential liquidity injections—will be crucial in shielding India from a broader slowdown.

What’s your take? Will this rate cut jumpstart growth, or are global headwinds too strong to overcome? Drop your thoughts in the comments below, and stay tuned for more updates as the RBI navigates these choppy economic waters!