RBI cuts key interest rate by 0.25% amid tariff gloom

As of today, April 9, 2025, the Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points, bringing it down to 6%. This decision was announced following the Monetary Policy Committee (MPC) meeting, which concluded earlier today, led by Governor Sanjay Malhotra.

This marks the second consecutive rate cut, with the previous reduction of 25 basis points occurring in February 2025, lowering the rate from 6.5% to 6.25%.

Objective of RBI

The RBI's move is aimed at boosting economic growth amid pressures from new U.S. tariffs and a sluggish economy, while inflation remains below the central bank's 4% target, recorded at 3.61% in February 2025. The stance of the monetary policy has also shifted from neutral to accommodative, signalling the potential for further rate cuts to stimulate consumption and support the middle class with cheaper loans, such as reduced EMIs on home loans.

The Standing Deposit Facility (SDF) rate has been adjusted to 5.75% as part of this policy change.

This rate cut is expected to provide relief to borrowers and is seen as a response to global economic challenges, including US President Donald Trump's recent tariff announcements, which could impact India's GDP growth, now projected at 6.5% for FY26, down from an earlier estimate of 6.7%.

Economists and market analysts had widely anticipated this move, with some suggesting the possibility of additional cuts totalling 75-100 basis points throughout 2025 if inflation remains benign.