RBI expected to deliver 3rd consecutive rate cut of 25 basis points on Friday, say experts

Mumbai: The Reserve Bank is likely to go for a third consecutive rate cut of 25 basis points (bps) on Friday as inflation continues to remain below the median target of 4 per cent, to push growth amid continued global uncertainty triggered by the US tariff moves.

Reserve Bank’s rate-setting panel Monetary Policy Committee (MPC) will start deliberations on the next bi-monthly monetary policy on June 4 and announce the decision on June 6 (Friday).

The RBI reduced the key interest rate (repo) by 25 bps each in February and April bringing it to 6 per cent. Six-member MPC headed by RBI Governor Sanjay Malhotra also decided to change the stance from neutral to accommodative in its April policy.

In response to the 50-bps cut in the policy repo rate since February 2025, most of the banks have reduced their repo-linked external benchmark based lending rates (EBLRs) and marginal cost of funds-based lending rate (MCLR).

“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,” said Madan Sabnavis, Chief Economist, Bank of Baroda.

He also expects that the RBI will detail its analysis on how the global environment would be affecting the Indian economy considering that the tariff reprieve provided by the US would end in July.

Aditi Nayar, Chief Economist, ICRA said with CPI inflation forecast to trail 4 per cent for a large part of this fiscal, monetary easing by the MPC is likely to continue.

“A 25 bps rate cut is expected next week, followed by two more cuts over the subsequent two policy reviews, taking the repo rate to 5.25 per cent by the end of the cycle,” she said.

In its annual report released on Thursday, the RBI said monetary policy is committed towards achieving durable price stability, which is a necessary prerequisite for high growth on a sustained basis.

The Reserve Bank also said it will undertake liquidity management operations in sync with the monetary policy stance and keep system liquidity adequate to meet the needs of the productive sectors of the economy.