RBI Cuts Repo Rate Amid Trade Tensions: Governor Sees Minimal Economic Impact
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The Reserve Bank of India (RBI) has unexpectedly cut the benchmark interest rate for the first time in six months, despite ongoing trade tensions with the US. Reserve Bank Governor Sanjay Malhotra downplayed the impact of US tariffs on India's economy, citing a 'rare goldilocks period' of low inflation (2.2%) and strong growth (8.0% in H1 2025-26). The RBI's six-member monetary policy committee, led by Governor Malhotra, voted unanimously to lower the repo rate by 25 basis points to 5.25%, the fourth rate cut since February. This move is expected to boost liquidity and lower consumer loan interests, allowing citizens to spend more. The RBI also revised its inflation forecast to 2% for the fiscal year, down from 2.6%, and raised its GDP growth projection to 7.3% from 6.8%. Governor Malhotra expressed confidence in the Indian economy's resilience, despite challenges from the external environment. The RBI's decision comes as the Indian rupee continues to depreciate, reaching a record low against the dollar. However, Governor Malhotra's comments suggest that the central bank is not overly concerned about the currency's decline. The US has imposed a 50% tariff on Indian goods, but the RBI governor believes this will have a minimal impact on the economy.
