RBI MPC may cut repo rate again: Key terms, projections and what to expect

RBI MPC April meet: The monetary policy committee is expected to do a second rate cut on April 9 and switch to an 'accommodative' stance. What does this mean?

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is set to announce its latest policy decision on Wednesday, with experts predicting another 25-basis-point rate cut. Alongside the MPC statement, the RBI will also release its Monetary Policy Report (MPR), offering insights into its outlook and strategy. This marks the central bank’s first meeting for the financial year 2025-26 (FY26).

 

The RBI has been on a policy easing path since October 2024, employing a mix of stance changes, rate cuts, liquidity measures, and exchange rate flexibility. After maintaining the repo rate at 6.5 per cent since February 2023, the central bank took its first step towards monetary easing in February, reducing the repo rate by 25 basis points to 6.25 per cent, marking the first cut in nearly five years. Experts now believe the RBI MPC to announce a second rate cut today.

 

 

Expectations from the April RBI MPC meeting

India’s retail inflation remained under control, with February 2025 figures recorded at 3.61 per cent, well below the RBI’s 4 per cent target. However, concerns over economic growth have emerged following the United States’ decision to impose a 26 per cent tariff on Indian imports. 

To support the economy, the RBI has been infusing liquidity into the financial system, according to a report by Reuters. Over ₹5.2 trillion has been injected through debt purchases and forex swaps, fostering conditions favourable for another rate cut. Given these dynamics, experts anticipate that the RBI will lower the repo rate by another 25 basis points in April.

 

Will the RBI change its policy stance?

The RBI’s stance has remained ‘neutral’, however, some analysts believe a shift to an ‘accommodative’ stance is now warranted. 

A ‘neutral’ stance allows the RBI to retain the flexibility to either increase or decrease interest rates based on macroeconomic conditions. An accommodative stance signals the RBI’s willingness to further reduce rates to boost economic activity, ensuring better transmission of rate cuts to lending and deposit rates. 

 

 

What is the RBI MPC?

The RBI’s MPC meets every two months to decide on key monetary policy measures, including interest rates. The committee considers factors such as inflation trends, money supply, and broader macroeconomic conditions before making its decisions. The committee comprises six members, including the RBI governor – who leads the meeting. Three members are from the RBI and three are external members appointed by the central government for a four-year term.

 

What is a repo rate?

The repo rate is a policy tool used by the RBI. It represents the rate at which the central bank lends short-term funds to commercial banks against government securities. A lower repo rate reduces borrowing costs for banks, enabling them to lend at lower interest rates to businesses and consumers. The current repo rate is currently at 6.25 per cent.

 

What does RBI rate cut mean?

If the RBI proceeds with a rate cut, it would mark a total reduction of 100 basis points in 2025, including the February cut. This would bring down interest rates on home loans, car loans, and potentially even personal loans, making borrowing more affordable for individuals and businesses.

 

Lower lending rates stimulate economic activity by encouraging borrowing and investment. However, the RBI only reduces rates when inflation is under control and additional liquidity is needed in the economy. Conversely, if inflation rises, the RBI may increase rates to tighten monetary conditions.

 

Inflation predictions by RBI

In its last MPC meeting in February, RBI projected consumer price index (CPI) inflation for FY25 at 4.8 per cent, with Q4 inflation estimated at 4.4 per cent. 

For FY26, assuming a normal monsoon, CPI inflation is projected at 4.2 per cent. Quarter-wise expectations are: 

Q1: 4.5 per cent

Q2: 4.0 per cent

Q3: 3.8 per cent

Q4: 4.2 per cent

 

Growth projections by RBI

Real gross domestic product (GDP) is expected to grow by 6.4 per cent year-on-year in FY25 driven by a recovery in private consumption. 

For FY26, economic growth is projected at 6.7 per cent. Quarter-wise expectations are:

Q1: 6.7 per cent

Q2: 7.0 per cent

Q3: 6.5 per cent

Q4: 6.5 per cent