RBI Monetary Policy 2025 key highlights: Repo rate cut to 6.25%, GDP likely to be 6.4%

Reserve Bank of India. File
| Photo Credit: Reuters

In a bid to add to the momentum of the Budgetary reliefs announced by the Centre, the Monetary Policy Committee (MPC) on Friday (February 7, 2025) decided unanimously to reduce the policy rate by 25 basis points to 6.25% from 6.5%. One basis point equals 0.01%. Consequently, the Standing Deposit Facility rate will be at 6%.

RBI Governor Sanjay Malhotra during the briefing said, “The interest of the economy demands financial stability and consumer protection. Our mandate at the RBI is to ensure both of them.”

Here are the key highlights from the announcement:

• The policy rate has been reduced by 25 basis points to 6.25% from 6.5%. One basis point equals 0.01%.

• The Standing Deposit Facility rate will be at 6%.

• Continuation of a neutral stance and remain unambiguously focused on a durable alignment of the inflation target, while supporting growth.

• Inflation on the decline and is expected to moderate in 2025-26 further, gradually aligning with the target [4%].

• MPC has decided to retain its neutral stance keeping in mind the excessive volatility in global financial markets and continued uncertainty about global trade policy along with adverse weather events, could pose risks to growth.

• Global headwinds however pose uncertainty to the outlook with downward risks.

• Real GDP growth for this year is estimated at 6.4% by the NSO.

• Agriculture activity remains upbeat.

• Manufacturing is expected to revive gradually in the second half of this year. Early Q3 results indicate a mild recovery in the sector.

• Business expectations remain upbeat. Services activity continues to be resilient, though the Services PMI has declined.

• Urban demand remains subdued.

• Aim to improve employment condition, tax relief in Union Budget, and moderating inflation will boost household consumption.

• Inflation has registered a sequential moderation in November and December.

• Food inflation pressures, absence of any supply shocks, should ease due to a favourable Rabi crop prospects.

• Core inflation is expected to rise but remain moderate.

• Assuming a normal monsoon, the inflation for 2025-26 is projected at 4.2% with the risks evenly balanced.