New Delhi: As global trade tensions escalate with the imposition of U.S. tariffs, the Reserve Bank of India (RBI) has moved to bolster economic stability by cutting the repo rate to 6%. This strategic decision is set to make borrowing more affordable, particularly for those seeking home loans, amidst a backdrop of rising uncertainties in international trade.
At the heart of this move is the RBI’s aim to inject liquidity into the economy and foster growth. The reduction of 25 basis points to 6% marks the second time this year the central bank has lowered the key rate, following a similar cut in February that took it down to 6.25%. This rate cut is pivotal as it influences the interest rates at which banks lend to consumers. Essentially, the repo rate is the interest rate charged by the RBI to commercial banks for short-term loans, meaning its decrease can encourage banks to offer more favorable lending terms to their customers.
RBI Governor Sanjay Malhotra highlighted that the Monetary Policy Committee (MPC) had a unanimous agreement on the rate cut, emphasizing the need to address the global economic challenges posed by tariffs. The U.S. has recently imposed a 26% reciprocal tariff on Indian goods, potentially impacting India’s economic growth. Despite these challenges, the RBI remains proactive in engaging with the U.S. to mitigate trade-related impacts.
The latest GDP growth forecast for the fiscal year has been adjusted downward to 6.5%, reflecting the broader concerns about global economic stability. Despite these uncertainties, sectors like agriculture and manufacturing are showing signs of resilience, with urban consumption picking up, indicating potential for sustained economic activity.
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