RBI slashes repo rate to 5.25% amid persistent rupee decline
What's the story
The Reserve Bank of India (RBI) has announced a reduction in the repo rate by 25 basis points, bringing it down to 5.25%. The move comes as part of the central bank's efforts to strike a balance between India's record-low inflation and a weakening rupee amid strong GDP growth. The decision was taken during the three-day meeting of the RBI-led Monetary Policy Committee (MPC).
Rate adjustment
RBI's decision amid economic challenges
The MPC also revised the standing deposit facility (SDF) rate to 5.25% from 5.5%. The marginal standing facility (MSF) rate and Bank Rate were also lowered to 5.5% from 5.75%. This comes as a response to India's strong economic performance, with GDP growth hitting an impressive 8.2% in Q2 FY2026 (July-September). However, the rupee has been under pressure, recently hitting a record low of over 90 against the dollar.
Economic indicators
Inflation and growth: A balancing act for RBI
The decision to cut the repo rate comes amid a sharp fall in inflation. Headline retail inflation, as measured by the Consumer Price Index (CPI), recently hit a multi-decade low of around 0.25%. This is largely due to falling food prices and recent GST cuts on consumer goods. The RBI has maintained a neutral stance, indicating its view on the balance between price stability and growth support going forward.