Reserve Bank of India Likely To Cut Rates Again In June

By swaliha | Published on June 5, 2025

Businesss / June 5, 2025

Reserve Bank of India Likely To Cut Rates Again In June

With growth holding up and global risks rising, the Reserve Bank of India may go for one more rate cut

The Reserve Bank of India (RBI) is expected to cut the repo rate by 25 basis points in June. As per data inflation has eased in recent months, mainly due to lower food prices. GDP growth for Q4 FY25 came in strong at 7.4%. With growth holding up and global risks rising RBI may go for one more rate cut.

RBI is set to announce its second monetary policy decision for the current financial year 2025-26 on Thursday. RBI Governor Sanjay Malhotra will announce decisions on June 6, 2025, at 10:00 AM. This announcement will conclude the three-day meeting of the Monetary Policy Committee (MPC) begins on Tuesday, June 4.

Research report of CareEdge suggests that CPI inflation fell to 3.2% in April, marking the lowest reading since August 2019. It has stayed below the 4% threshold for three consecutive months. The sustained decline in food and beverage inflation contributed to this lower inflation rate. Inflation in the food and beverages category decreased to 2.1% in April, from a peak of 9.7% in October 2024.

Experts feel that Liquidity has improved and short-term rates have softened. Besides this RBI will likely maintain an accommodative stance, but stay cautious amid global uncertainties.

CareEdge also feels that falling inflation gives the RBI room to prioritise growth amid global headwinds. With CPI expected to stay comfortable in FY26, we see scope for a 0.50 per cent rate cut this fiscal. it includes 0.25 per cent cut in June and possibly more if growth loses steam.

Anuj Puri, Chairman, ANAROCK Group said that with inflation at a multi-year low (3.16% in April 2025), the RBI has scope to continue its accommodative stance. A further repo rate cut — building on the cumulative 50 basis points already delivered this year — would lower borrowing costs for homebuyers and developers. This is critical for reviving demand in affordable and mid-income housing, where buyers are most sensitive to interest rates.

Vegetable basket (-11% YoY), a key driver of food inflation, has been in deflationary zone for three consecutive months, reversing the trend seen in the CY2024, where it averaged ~27%. Apart from vegetables, ongoing deflation in pulses (-5% YoY) and spices (-3% YoY) has aided in the moderation of food inflation.

The MPC must also ensure that banks transmit these cuts fully to end borrowers, not just large developers. The RBI has cut the repo rate twice in the past two MPC meetings. However, banks have been slow to transmit them. While a further rate cut would be a positive, what is even more important is that the benefits are passed on to borrowers, he added.

Chief Economist, ICRA Limited Aditi Nayar also believes the same. She said that with CPI inflation forecast to trail 4 per cent for a large part of this fiscal, monetary easing by the MPC is likely to continue. A 25 bps rate cut is expected, followed by two more cuts over the subsequent two policy reviews, taking the repo rate to 5.25% by the end of the cycle.