RBI Cuts Rates to Cushion Global Shocks, Signals Accommodative Stance

RBI Eases Policy, Embraces Accommodative Stance

Reserve Bank of India (RBI) on 9th April 2025, cut its policy repo rate by 25 basis points to 6% in the Monetary Policy Committee (MPC) meeting, the second straight rate cut under Governor Sanjay Malhotra. Shedding its traditional approach, the RBI also pursued an "accommodative" monetary policy to energize economic growth amidst global uncertainties like U.S. tariffs that are testing India's export-oriented industries. In doing so, the RBI has tried to boost the economy by reducing the cost of borrowing for people and corporations.

Inflation Within Target, but Global Headwinds Prompt Action

The RBI action preceded India's Feb 2025 retail inflation reading of 3.61% below RBI's 4% target. Despite this, owing to global trade tensions and a U.S. move to charge a 26% tariff for Indian imports, the RBI slashed its FY26 GDP growth prediction. The reduction in interest is a pre-emptive strike to counterbalance the probable deleterious effects of these outside shocks on India's economy.

Market Response Muted as RBI Balances Growth and Inflation

After the announcement, the yield on the 10-year government bond dipped marginally, the rupee dipped marginally, and equity indices dipped around 0.3% each. The RBI move reflects its commitment to strike a balance between economic growth stimulus and controlling inflation in challenging global economic times. The "accommodative" policy reflects a penchant for preferring rate reduction or keeping rates unchanged at the mercy of extraordinary events alone.

Technicals-

Major resistance- 88

Near-term resistance - 86.85

Minor support-  86,85

Trend reversal level- 84.80