The Reserve Bank of India cut its benchmark repo rate by 25 basis points to 6.25 per cent, delivering the first reduction in the policy rate since May 2020.
The Monetary Policy Committee voted unanimously in favour of the cut. The committee has six members — three internal Reserve Bank officials and three external members appointed by the government. The committee maintained its neutral policy stance.
INFLATION
Consumer price inflation had eased to 5.22 per cent in December 2024, within the Reserve Bank's mandated target band of 2 to 6 per cent though above the 4 per cent midpoint.
India's inflation trajectory in the period leading up to the decision had been shaped by a moderation in food prices. Vegetable prices, which had contributed to elevated CPI readings in earlier quarters, moderated.
The repo rate, at which the Reserve Bank lends overnight funds to commercial banks, serves as the anchor for the broader interest-rate structure across India's financial system.
The Reserve Bank's decision follows rate-cutting moves by several major central banks globally, including the United States Federal Reserve, which began its own easing cycle in the second half of 2024.