RBI's 2025 Policy Shift: From Guarded Easing to Aggressive Growth Support

• RBI began 2025 with a guarded 25 bps rate cut in February under Governor Sanjay Malhotra, maintaining a neutral stance despite disinflation.
• By April, inflation was below target, prompting RBI to shift to an accommodative stance and another 25 bps cut, signaling a clear easing bias.
• June saw an aggressive 50 bps rate cut, bringing total easing to 100 bps (6.50% to 5.50%) in four months, surprising markets.
• Post-June, RBI returned to a neutral stance, acknowledging limited space for further rate cuts and focusing on transmission.
• Despite strong growth, a December 25 bps cut was made due to exceptionally low inflation (2.0% projected for 2025-26), prioritizing growth support.

Why It Matters: RBI's 2025 policy evolved from cautious easing to active growth support, driven by sharp disinflation.