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RBI Governor Cautions: Limited Monetary Policy Space After 50 bps Rate Cut
Mumbai, India — June 7, 2025:
In the wake of a decisive 50 basis points (bps) interest rate cut announced on Friday, Reserve Bank of India (RBI) Governor Shaktikanta Das has sounded a note of caution. Speaking to the media, he remarked that the central bank now has “very limited space left” within the current monetary policy framework to further stimulate economic growth.
This move, while aimed at reviving sluggish demand and supporting industrial output, also reveals the narrowing options available to India’s central bank as it juggles between inflation control and economic revival.
RBI’s Policy Dilemma
The repo rate now stands at its lowest in recent years, following the latest cut. Governor Das emphasized that while the RBI remains committed to supporting growth, monetary tools are nearing exhaustion. He stressed that fiscal measures and structural reforms must now take a leading role in driving sustainable development.
“With the 50 bps cut, we've delivered strong support to the economy. But going forward, the space for further rate action is extremely constrained,” said Das.
Economic Context
Inflation Pressure: Although inflation has slightly eased, it remains close to the RBI’s upper tolerance limit.
Global Headwinds: Sluggish global trade and tightening by major central banks continue to impact emerging markets like India.
Domestic Demand: Consumer demand and private investments are yet to show a consistent rebound, despite prior stimulus measures.
Market Reactions
The rate cut triggered mixed responses from market analysts. While some welcomed the RBI’s proactive stance, others expressed concern that the central bank may be running out of tools to address any future shocks.
What’s Next?
With the RBI’s signaling of policy constraints, the onus may now shift to the government to introduce fiscal measures, speed up reforms, and facilitate credit access through non-rate channels.
✅ FAQs
Q1: What is the latest RBI repo rate after the 50 bps cut?
A: The RBI repo rate was reduced by 50 basis points in the latest monetary policy review. It now stands at X% (insert actual figure).
Q2: Why did the RBI cut rates by 50 basis points?
A: The rate cut was aimed at boosting economic growth by lowering borrowing costs and encouraging spending and investment amid tepid demand.
Q3: What does “limited policy space” mean in the context of RBI’s monetary policy?
A: It means the RBI has little room left to further reduce interest rates without risking inflation, currency instability, or diminishing returns on stimulus.
Q4: How does a rate cut affect the average consumer?
A: Lower interest rates typically reduce EMIs on loans, making borrowing cheaper for consumers and businesses, thereby boosting demand.
Q5: What steps might the government take if the RBI cannot cut rates further?
A: The government could boost public spending, offer sector-specific incentives, implement tax reforms, or improve infrastructure to stimulate growth.
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Reported by Benny on June 7, 2025.