RBI’s Monetary Policy Committee Convenes; Markets Anticipate Third Rate Cut

The Reserve Bank of India’s Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, began deliberations on Wednesday to review key interest rates, including the repo rate.

The committee is likely to announce its decision on 6 June, with economists predicting another 25 basis point cut, bringing the repo rate down to 5.75%.

This would mark the third consecutive rate cut, following earlier reductions totalling 50 basis points in 2025.

With inflation remaining within the RBI’s comfort zone and GDP growth facing headwinds, analysts believe the case for monetary easing has strengthened considerably.

Headline retail inflation has continued to ease, standing at just 3.2% in April—the lowest since July 2019 and comfortably below the RBI’s medium-term target of 4%.

Meanwhile, the Indian economy is showing signs of a cyclical slowdown amid global macroeconomic uncertainty and trade-related disruptions, particularly linked to recent policy shifts in the US.

Though the RBI had maintained a GDP growth forecast of 6.5% for FY26 in its April policy, several global institutions and domestic rating agencies have since revised growth estimates to a more conservative range of 6.0% to 6.3%.

According to analysts at Bajaj Broking Research, the MPC’s stance has clearly shifted from neutral to accommodative, signalling an intent to sustain growth while inflation remains subdued.

SBI Forecasts Bigger Cut

A recent report by the State Bank of India has projected an even bolder move, a 50 basis point cut, citing subdued inflation, easing financial stress, and surplus domestic liquidity.

“Inflation is expected to stay within the tolerance band, and supporting growth should now be the primary focus,” said Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

The report added that concerns over domestic liquidity and financial stability have receded, allowing room for more aggressive easing.

It argued that the current environment justifies a ‘jumbo’ rate cut to preserve economic momentum.

Banks have already started adjusting deposit and savings rates in response to the rate-easing cycle.

Banks have already lowered interest rates on savings accounts to the floor rate of 2.70% and cut fixed deposit (FD) rates by 30–70 basis points since February 2025.

Experts expect the transmission of policy rate cuts to deposit products to strengthen further in the coming months.

While the RBI will weigh domestic indicators alongside global trends, particularly monetary actions in advanced economies, consensus is building around further monetary support.

Economists increasingly view a third rate cut as a prudent step to safeguard India’s growth trajectory amid external volatility and favourable inflation dynamics.

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