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With just a week to go before the next Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) has offered subtle but telling signals about its stance on interest rates through its Annual Report for 2024–25.

For many, the April rate cut marked a positive start to the new financial year of 2025-26 as Sanjay Malhotra & team decided to bring down the repo rate to 6 per cent as it also changed it’s stance to accommodative. Post this, expectations have only been that there will likely be another rate cut in the June meeting as Indian economy races to beat Japan’s.

While staying true to its data-dependent narrative, the central bank’s latest outlook hints at a tilt toward maintaining a growth-supportive approach, even as global uncertainties cloud the outlook.

Also Read: RBI’s net income surges by 27.3% to Rs 2.69 lakh cr in FY25 as forex gains rise

The report points to easing inflation pressure, particularly in February and March 2025, driven by a sharp decline in food prices. This has led to “greater confidence” for headline inflation to align with the target of 4.0 per cent over the next year, setting the stage for potential policy easing if conditions warrant.

“The benign inflation outlook and moderate growth warrant monetary policy to be growth supportive, while remaining watchful about the rapidly evolving global macroeconomic conditions,” the apex bank has said.

Also Read: India to retain crown of fastest growing major economy amid global gloom, says RBI

Despite the improving inflation outlook, the RBI remains cautious. It flags downside risks to growth from uncertainty about global trade post-protectionist measures, protracted geopolitical tensions and global financial market volatility. These very factors also pose upside risks to inflation, reinforcing the need for a balanced, watchful approach.

  • Published On May 29, 2025 at 12:55 PM IST

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