Rate Cuts Ahead: MPC's June 2025 Monetary Policy Decisions

The Monetary Policy Committee (MPC) held its 55th meeting from June 4 to 6, 2025 under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India. The MPC members Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta and Dr. Rajiv Ranjan attended the meeting.

The MPC of the Reserve Bank of India made some important decisions regarding the country's monetary policy.

Rate Cut

The MPC voted to reduce the policy repo rate by 50 basis points (bps) to 5.50 per cent with immediate effect. 

Consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.75 per cent.

This means that borrowing costs for banks will decrease, which can help stimulate economic activity.

Economic Outlook

The global economic situation has improved slightly, but uncertainty remains.

According to the provisional estimates released by the National Statistical Office (NSO) on May 30, 2025, real GDP growth in Q4:2024-25 stood at 7.4 per cent as against 6.4 per cent in Q3. On the supply side, real gross value added (GVA) rose by 6.8 per cent in Q4:2024-25. For 2024-25, real GDP growth was placed at 6.5 per cent, while real GVA recorded a growth of 6.4 per cent.

India’s economy is expected to grow at 6.5% in the financial year 2025-26 with Q1 at 6.5 per cent, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4 at 6.3 per cent. However, global tensions and trade uncertainties still pose risks.

Inflation Trends

Inflation has decreased significantly, reaching a six-year low of 3.2% in April 2025. The MPC expects inflation to remain low, with a projected average of 3.7% for the year, which is below the target of 4%.

Rationale for Decisions

The MPC aims to support growth while keeping inflation in check. The recent rate cut is part of a strategy to encourage spending and investment in the economy.

Future Monitoring

The MPC has also decided changed its stance from "accommodative" to "neutral," meaning it will now carefully assess economic data before making further changes to the policy.

Next Steps

The minutes of this meeting will be published on June 20, 2025, and the next MPC meeting is scheduled for August 4 to 6, 2025.