Repo rate cut 25 bp to 5.25%; 'rare Goldilocks period', says RBI Governor, Pg1

Key Highlights:

• The RBI's MPC unanimously cut the repo rate by 25 bps to 5.25%.
• RBI revised its GDP projection for FY26 upward by 50 bps to 7.3%.
• The central bank trimmed its CPI forecast to 2% from 2.6%.
• RBI Governor Sanjay Malhotra termed the current economic situation a "rare Goldilocks period".
• The MPC voted 5:1 to maintain a neutral stance.
• RBI will conduct OMO purchases of government securities worth Rs 1 lakh crore.

Detailed Insights:

• The repo rate cut, the first since June 2025, aims to ease borrowing costs and boost consumption and investment.
• The RBI revised upward the GDP forecast for October-December to 7% from 6.4% and for January-March 2026 to 6.5% from 6.4%.
• The RBI revised down its inflation projection for Q3 FY26 to 0.6% from 1.8%, and for Q4 FY26 to 2.9% from 4%.
• The central bank announced open market operations (OMO) purchases of government securities worth Rs 1 lakh crore to inject durable liquidity.
• The RBI will conduct a three-year USD/INR Buy Sell swap amounting to USD 5 billion during the current month.
• The rupee closed at 89.95 against the dollar on Friday.

Key Concepts Involved:

• Repo Rate: The rate at which commercial banks borrow money from the RBI.
• CPI (Consumer Price Index): A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
• Open Market Operations (OMO): The buying and selling of government securities by the central bank to control the money supply.