Reserve Bank of India Cuts Policy Rate by 25 Basis Points to 6.25%, First Reduction in 5 Years
Mumbai, India (February 18, 2025) – The Reserve Bank of India (RBI), the country’s central bank, has announced a reduction in its policy repo rate by 25 basis points to 6.25%, effective immediately. This marks the first reduction in the policy rate in nearly five years.
Reasons for the Cut:
The RBI attributed the rate cut to the following factors:
- Continued moderation in retail inflation
- Slowing economic growth
- Concerns over global headwinds
Inflation:
Headline retail inflation in India has been moderating in recent months, falling from a high of 7.79% in April 2024 to 6.52% in January 2025. The RBI expects inflation to remain within its target range of 4%-6% during the remaining part of the current fiscal year.
Economic Growth:
The Indian economy has been slowing in recent quarters, with GDP growth falling to 6.0% in the third quarter of 2024-25. The RBI revised its GDP growth forecast for the current fiscal year to 6.4% from its previous estimate of 6.8%.
Global Headwinds:
The RBI also cited concerns over global headwinds, including the ongoing Russia-Ukraine conflict, tightening monetary policies in major economies, and the slowdown in China. These factors have created uncertainty and impacted global demand and growth prospects.
Impact of the Rate Cut:
The rate cut is expected to have a positive impact on economic activity. It is likely to:
- Reduce borrowing costs for businesses and consumers
- Boost demand for credit and investment
- Stimulate economic growth
Market Reaction:
The Indian stock market reacted positively to the RBI’s rate cut, with the BSE Sensex and NSE Nifty indices rising by over 1%.
Outlook:
The RBI indicated that it will continue to monitor the evolving economic situation and respond accordingly. It remains committed to achieving its inflation and growth objectives while ensuring financial stability.
Conclusion:
The Reserve Bank of India’s decision to cut the policy rate by 25 basis points signals a shift in its monetary policy stance. The rate cut is aimed at supporting economic growth amidst moderating inflation and global uncertainties. The RBI will continue to monitor the situation and take further policy actions as deemed necessary.
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日本貿易振興機構 a new article on 2025-02-18 15:40 titled “インド準備銀が政策金利を約5年ぶりに引き下げ、6.25％に”. Please write a detailed article on this news item, including any relevant information. Answers should be in English.
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