Experts believe RBI's rate cut to ease interest costs, support growth

In a move eagerly awaited by markets and consumers, the Reserve Bank of India (RBI) has reduced its repo rate, signaling a shift in monetary policy. The decision, influenced by moderating inflation and a desire to stimulate economic activity, repo rate cut, RBI, MPC, Sanjay Malhotra, economic growth, inflation, home loans, EMI reduction, housing demand, real estate, fiscal policy, budget impact, GDP forecast, monetary policy easing, interest rates, financial markets, consumer spending, investment cycle, global economy.

RBI Reduces Repo Rate

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has cut the repo rate by 25 basis points to 6.25%. This is the first rate cut since May 2020, marking a significant change after a period of rate increases that began in May 2022 in response to the Russia-Ukraine conflict. The MPC's decision is seen as a move to support economic growth, particularly after the government's recent tax cuts in Budget 2025, intended to boost consumer spending. Sanjay Malhotra, the new RBI Governor, presided over this first policy decision.

Experts Weigh In

Experts believe the repo rate cut will provide relief to existing homebuyers by lowering their equated monthly installments (EMIs) on home loans and will stimulate overall homebuying sentiment. Real estate experts anticipate enhanced affordability, potentially unleashing a new wave of demand in the housing market. Dharmakirti Joshi, Chief Economist of Crisil Ltd, noted that the easing of consumer price index (CPI) inflation and the need to support economic growth prompted the RBI's action.

Concerns and Future Outlook

Despite the positive outlook, some concerns remain. Rising property prices and persistent inflation could diminish the rate cut's effectiveness. It remains to be seen whether banks will promptly pass on the full benefit to borrowers. The MPC has maintained a "neutral" policy stance, allowing flexibility to respond to future economic developments. While a further rate cut of 25 bps may occur in forthcoming meetings, the timing of future cuts remains uncertain and dependent on retail inflation trends.