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RBI Doubles Down on Supporting Growth, but Change in Stance to Neutral Signals Likely Pause Ahead

  • 6 Jun 2025
  • Post Views: 1237

In its June policy, the RBI surprised markets with a 50-bps repo rate cut (to 5.5%) and a 100-bps CRR cut (to 3%), front-loading easing to support growth. The front-loaded policy easing is backed by broad-based disinflation and is aimed at pushing for a faster policy transmission. The CRR cut is expected to inject Rs 2.5 lakh crore by December, in addition to the Rs 9.5 lakh crore already infused. This may push the weighted average call rate below 5.5%, amplifying the easing. The RBI’s inflation forecast for FY26 has been revised downward to 3.7% amid softening food and global prices, while the economic growth projection has been retained at 6.5%, supported by a strong agricultural outlook and public capital expenditure. The RBI also shifted its stance from ‘Accommodative’ to ‘Neutral’, signalling a likely pause and a data-dependent approach going forward. We believe that further policy easing is possible but would require a material downside surprise to growth. We expect a pause on the rate in the next meeting in August.