India’s central bank, the Reserve Bank of India (RBI), reduced its repo rate by 25 basis points to 5.25% on Friday. This decision comes at a time when US President Donald Trump’s strict tariffs and global trade worries are putting pressure on many economies.
The Monetary Policy Committee made the decision unanimously, hoping the lower rate would support the economy during a period of low inflation and falling exports.
Some experts had predicted that the RBI might avoid another rate cut this year, since it had already reduced more than 100 basis points in three earlier rounds. But most analysts agreed that India needed another cut to soften the negative impact of Trump’s high tariffs and the decline in exports.
RBI Governor Sanjay Malhotra also announced that the bank will buy more than 110 million dollars’ worth of government securities in the open market. To ensure enough foreign currency liquidity, the RBI plans a three-year dollar-rupee swap worth five billion dollars.
He added that the RBI is maintaining a neutral policy stance and is open to more rate cuts if needed. India is currently facing several challenges, including falling exports, a weak rupee, and slower economic growth.
Meanwhile, Prime Minister Narendra Modi’s government has already taken steps to boost economic activity by cutting consumption taxes and reforming labor laws.
With global trade tensions still rising, the RBI’s latest rate cut is expected to provide some relief to industries, exporters, and consumers.
