Last Updated:June 02, 2025, 12:24 IST
The RBI MPC will meet from June 4-6 to decide on interest rates. Economists expect a 25-bps cut in the repo rate to 5.75%, while SBI predicts a 50-bps cut.
The Reserve Bank of India has reduced the repo rate by 50 basis points in the previous two monetary policy reviews to 6%.
The Reserve Bank of India’s Monetary Policy Committee (RBI MPC) is set to meet for three days from June 4 to June 6, amid global uncertainties, to decide on interest rates in India. According to most economists, the central bank’s rate-setting panel is expected to go for a 25-basis-point cut in the repo rate to 5.75%. However, SBI in its latest report expects a 50-bps reduction.
The Reserve Bank of India has reduced the repo rate by 50 basis points in the previous two monetary policy reviews to 6%. It cut 25 bps each in February and April reviews.
Expecting a 25-bps cut, Madan Sabnavis, chief economist at Bank of Baroda, said, “We do believe that given the rather benign inflation conditions and the liquidity situation which has been made very comfortable through various measures of the RBI, the MPC would go in for a 25 bps cut in the repo rate on the (June) 6th.”
The commentary on both growth and inflation will be important as there are expectations of revisions in their forecasts for both the parameters, he added.
Echoing similar expectations, Aditi Nayar, chief economist at ICRA, said, “With the vegetable index dipping further, and compressing the food inflation the headline CPI inflation eased further to a 69-month-low of 3.16 per cent in April 2025… A 25-bps rate cut appears forthcoming in the June 2025 policy, followed by easing of 25 bps each in the August and October 2025 policy reviews.”
The CPI inflation is expected to average 3.5 per cent in FY2026, with the prints for Q2 and Q3 sharply trailing the MPC’s projections for these quarters, allowing for an additional 75 bps of rate cuts in this calendar year, she said.
A basis point is equal to a 100th of a percentage point.
India’s CPI inflation in April 2025, the latest available data, fell to 3.16 per cent, which is the lowest since July 2019. It is well within the RBI’s target level of 4% (+/- 2%).
Sankar Chakraborti, MD & CEO of Acuité Ratings & Research, also expects a 25 bps interest rate cut saying that the latest nominal GDP growth data indicates that inflation is range-bound.
“The nominal GDP growth of 9.8% against a real growth of 6.5% implies a GDP deflator of around 3.3%, meaning our inflation is range-bound. This growth number, with the current background of low inflation, creates some monetary space. We continue to expect the RBI to deliver two more 25 bps rate cuts this year, in June and August,” said Chakraborti.
Also Read: India’s Q4 GDP Grows At 4-Quarter High Of 7.4%, Full FY25 Growth At 6.5%
India’s real GDP grew by 7.4% in the fourth quarter of FY25, compared to 8.4% in the same quarter of the previous fiscal year. In full FY25, real GDP grew 6.5%, while nominal GDP rose 9.8%.
SBI Expects 50 BPS Repo Rate Cut
However, State Bank of India expects a 50 bps repo rate cut on Friday, June 6.
In its latest report, SBI said, “We expect a 50-basis point rate cut in June’25 policy as a large rate cut could reinvigorate a credit cycle.”
It also said a large rate cut could help revive the credit cycle, with the total rate cut over the easing cycle possibly going up to 100 bps.
The report highlighted that the current liquidity condition in the banking system is in extended surplus mode. Due to this, liabilities are getting repriced faster in the ongoing rate-easing cycle.
“Banks have already brought down interest rates on savings accounts to a floor rate of 2.70 per cent,” according to the SBI report.
The report also pointed out other positive developments such as the Indian Meteorological Department’s (IMD) forecast of an above-normal monsoon, strong arrival of crops, and falling crude oil prices. These factors have led SBI to revise its CPI inflation estimate for FY26 to around 3.5 per cent with a downward bias.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso… Read More
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