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RBI MPC Meeting Highlights – April 2025

RBI MPC Meeting Highlights – April 2025

Key Highlights

  • Repo Rate Cut: RBI reduced the repo rate by 25 bps to 6.00%.
  • Policy Stance: Shifted from "neutral" to accommodative.
  • Inflation Projection: Lowered to 4% from 4.2% due to lower food and oil prices.
  • GDP Forecast: Revised down to 6.5% (previously 6.7%) amid global trade uncertainties.
  • Liquidity Target: RBI to maintain liquidity surplus at 1% of deposits (~₹2 trillion).

Impact on Borrowers and Investors

  • Borrowers: Likely reduction in loan EMIs as banks may lower lending rates.
  • Investors: Bond yields may adjust; equity markets may respond positively to the accommodative stance and lower interest rates.

Impact on Indian Financial Markets

The repo rate cut and dovish stance signal a supportive monetary policy environment. This is expected to:

  • Boost sentiment in the stock market, especially rate-sensitive sectors like banking, real estate, and auto.
  • Lead to a short-term rally in government and corporate bonds due to falling yields.
  • Increase liquidity in the system, potentially fueling credit growth and investments.
  • Encourage domestic and foreign institutional investors to revisit fixed-income and equity allocations.

Global Economic Context

RBI's decision comes amid global macroeconomic volatility including:

  • US-China trade tensions and tariff escalation
  • Moderating global inflation
  • Shifting monetary stance in major economies like the US Fed and ECB

This global environment has influenced RBI’s focus on sustaining growth and cushioning external shocks.

Sources

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