Economists Predict Third Consecutive RBI Rate Cut: 3 Reasons a 25 bps Reduction May Be on the Horizon

The Reserve Bank of India’s Expected Rate Cut and Monetary Policy Decision

Financial analysts predict that the Reserve Bank of India (RBI) will make its third consecutive 25 basis points rate cut on June 6, 2025. This decision is supported by factors such as easing inflation, stable GDP growth, and uncertainties in global trade. Experts from Bank of Baroda, CareEdge Ratings, and other institutions are all in agreement on this anticipated move.

RBI Governor Sanjay Malhotra is scheduled to announce the monetary policy decision on June 6, following the three-day Monetary Policy Committee (MPC) meeting that commenced on June 4 in Mumbai. The MPC, which consists of six members including Governor Sanjay Malhotra and Deputy Governor M Rajeshwar Rao, is meeting at a time when inflation is at its lowest point in nearly six years, and growth indicators are showing mixed signals.

Economic Outlook and Global Factors

Bank of Baroda foresees a ‘hat-trick’ of rate cuts, along with a downward revision in inflation forecast for the fiscal year 2025-26. The bank maintains its inflation forecast at around 3.8 to 3.9 per cent for FY26, reflecting the continuous moderation in food prices and expectations of a normal monsoon and subdued global commodity prices. Additionally, global trade tensions, particularly between the US and China, continue to pose risks affecting the Indian economy.

Inflation Trends and Growth Projections

Recent data shows that retail inflation has eased to 3.2 per cent in April 2025, the lowest since July 2019, setting a favorable backdrop for further monetary easing. This broad-based disinflation, supported by various consumer segments, indicates well-anchored inflation expectations. Despite India’s status as the world’s fastest-growing major economy, risks from subdued manufacturing, slow rural consumption, and weak global demand are still prevalent.

CareEdge Ratings anticipates more easing from the RBI, with a total of 50 basis points reduction expected through FY26. The agency notes that inflation is under control, allowing the central bank space to continue its easing measures.

Banking Sector and Policy Implications

Bank of Baroda highlights that the transmission of rate cuts to the banking system has been modest, with public sector banks experiencing greater reductions in lending and deposit rates compared to private sector banks. The June 6 policy outcome will provide insights into the RBI’s strategy for FY26 amid increasing uncertainty in the global trade landscape and the impending US tariff deadline on July 9.