RBI cuts repo rate as Trump’s tariff turmoil rattles markets

As US President Donald Trump’s latest volley of reciprocal tariffs rattled global markets, the Reserve Bank of India stepped in with a timely monetary policy move, cutting the key repo rate by 25 basis points to 6%.

The decision, announced just minutes after the new US-India tariffs took effect, signals the RBI’s intent to support non-inflationary growth in an increasingly uncertain global environment.

In his address following the Monetary Policy Committee (MPC) meeting, RBI Governor Sanjay Malhotra acknowledged that global headwinds — especially the sweeping tariffs from Washington — have added new layers of complexity to policy-making.

“The global economy is navigating a period of significant uncertainty,” Malhotra said, referencing the newly implemented 26% tariff on Indian goods by the U.S., which is expected to dampen merchandise exports and stoke inflationary pressures.

Second cut in a row, accommodative stance adopted

The latest April 8 rate reduction marks the RBI’s second consecutive cut this year and shifts the policy stance from ‘neutral’ to ‘accommodative’ — a clear signal that more easing could follow if conditions warrant. With this move, the central bank aims to lower borrowing costs and stimulate domestic demand amid weakening external trade conditions.

The RBI projected GDP growth at 6.5% for FY26, with inflation expected to stay around 4%. However, analysts warn that Trump’s tariff hikes could disrupt this balance. “The tariffs may raise import costs and reduce export competitiveness, posing dual challenges to inflation and growth,” said an economist with a leading investment bank.

Industry welcomes move, eyes boost in demand

Industry stakeholders hailed the RBI’s move as timely and growth-positive. Prashant Sharma, President of NAREDCO Maharashtra, said the rate cut would "revive consumption and investment cycles" while offering a much-needed boost to the real estate sector. “It increases affordability for homebuyers and liquidity for developers,” he noted.

BankBazaar CEO Adhil Shetty added that home loan interest rates could drop below 8% once again, especially for borrowers with high credit scores. He advised homeowners to refinance existing loans to benefit from the lower rates. “Borrowers should check if their loans are linked to the repo rate. If not, they may be missing out on the full benefits of rate cuts,” Shetty said.

Loan rates set to fall

Following the RBI’s decision, interest rates on home, auto, and personal loans are expected to decline, bringing relief to consumers and businesses alike. Analysts anticipate the move will further encourage spending and investment, cushioning the Indian economy against external shocks.

As global trade tensions escalate, the RBI’s proactive stance could prove pivotal in navigating the uncertain road ahead — keeping inflation in check while trying to secure steady economic growth.