Indian central bank front-loads rate cut to boost growth amid global volatility

[Reserve Bank of India]
Mrinal Pal/iStock Editorial via Getty Images

Indian stocks rallied on Friday after the central bank delivered a bigger-than-expected interest rate cut, as it front-loaded policy easing to support domestic growth in the "fragile and highly fluid" global backdrop.

The Reserve Bank of India lowered its policy repo rate by 50 basis points to 5.5%, the lowest level since 2022 and its third consecutive cut. Following the decision, the benchmark Nifty 50 (NIFTY [https://seekingalpha.com/symbol/NIFTY]) logged its best trading session in three weeks to end 1% higher. BSE Sensex (SENSEX [https://seekingalpha.com/symbol/SENSEX]) closed up 0.9%.

At a press conference, RBI Governor Sanjay Malhotra said "front-loading" rate cuts was needed to support economic growth, given heightened global uncertainty.

"Strong macroeconomic fundamentals and benign inflation outlook provide space for monetary policy to support growth, while remaining consistent with the goal of price stability," he said [https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=60605]. "Today's policy action should be seen as a step towards propelling growth to a higher aspirational trajectory."

Malhotra added that after cutting rates by 100 bps since February 2025, the RBI has changed its stance from accommodative to neutral. It will assess incoming data and the evolving outlook to chart out future policy.

"The RBI is signalling a pause, but it's leaving the door open for more easing if growth or inflation weakens further," said Deepali Bhargava, chief economist - Asia-Pacific at ING. "… with real policy rates still sitting well above historical norms, we continue to expect one 25 bp rate cut later this year, likely in Q4."

The RBI's policy decision echoes recent moves by central banks in China, South Korea and Indonesia to stimulate domestic growth amid global uncertainty.

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