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The Reserve Bank of India in its second bi-monthly monetary policy review in the backdrop of favourable macros on expected lines reduced repo rate cut by 50 basis points to 5.5 per cent.1 basis point is one-hundredth of a percentage point.

After a 100 basis point rate cut since February 2025, the Governor said it is left with lower room to support growth and hence it changed stance to 'neutral' from the previous 'accomodative'.

RBI Governor Sanjay Malhotra added that from now MPC will carefully assess income data, evolving outlook to chart out future policy.

In the April review, the MPC also decided to switch to an "accommodative" stance from "neutral".

An accommodative stance indicates the RBI's intent to lower the key lending rate, whenever possible, while striking a balance between economic growth and retail inflation. Repo rate is the key interest rate at which the central bank lends short-term funds to commercial banks.

The June MPC review came at a time when the economy has achieved a one-year high in growth with a six-year low in consumer inflation, while markets stare at the end of a 90-day pause on America's reciprocal tariffs on most of its trade partners due next month. 

Zee Business poll anticipated 80 per cent chances of a 25 bps rate cut, while the chances for status quo and 50 bps rate cut were at 0 per cent and 20 per cent, respectively.

CPI inflation forecast has been now lowered for FY2025-26 to 3.7 per cent from the earlier 4 per cent. For the Q1FY26, the forecast is 2.9 per cent, while for Q2 and Q3 it is at 3.4 per cent and 3.9 per cent, while for the last quarter it is pegged at 4.4 per cent.

The RBI has also slashed the CRR by 100 basis points which will infuse good liquidity and at the same time reduce the cost of funds.FY26 real GDP forecast has been maintained at 6.5 per cent.

Jonathan Garner, Chief Asia and Emerging Markets Equity Strategist at Morgan Stanley remaining overweight on India - anticipated two rates this year- with the first rate cut as early as this week.“We think two rate cuts, one likely this week, and one in the second half of the year,” Garner said  on the sidelines of the Morgan Stanley Annual India Investment Conference in Mumbai.

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