RBI Slashes Rates to Boost Economy Amid Rising US Tariffs

The Reserve Bank of India reduced the repo rate by 25 basis points to 5.25%, aiming to make loans cheaper and support India's economy amid high US tariffs. The move, paired with Rs 1 lakh crore liquidity boost, seeks to counter trade deficits and enhance economic growth.

On Friday, the Reserve Bank of India (RBI) announced a cut to its key interest rate, marking the first reduction in six months. This move is expected to lessen home, auto, and other loan costs, providing much-needed relief to an economy facing heightened US tariffs.

The central bank's monetary policy committee, led by Governor Sanjay Malhotra, voted unanimously to lower the repo rate by 25 basis points to 5.25%. The decision retains a neutral stance, potentially paving the way for further cuts. This initiative aims to mitigate economic turmoil following President Trump's 50% tariff imposition on Indian goods, which has negatively affected exports and widened the trade deficit.

In an effort to bolster liquidity, the RBI announced open market purchases of government bonds worth Rs 1 lakh crore. The bank will also conduct a USD 5 billion buy-sell swap, enhancing the banking system's liquidity and easing seasonal pressures. These measures come amidst a rare 'goldilocks' phase of low inflation and high growth rates, promising a conducive environment for supportive policies.

(With inputs from agencies.)