Why SBI Research expects the RBI to cut the repo rate again in 2025, sooner than you think

The Reserve Bank of India (RBI) has already reduced the repo rate by 100 basis points (bps), or 1%, in 2025. But it has good reasons to go for another repo rate cut, this time by 25 bps, or 0.25%, sooner than what was expected earlier, according to a report by SBI Research.

Such a move, if announced by the RBI, will help in further reducing the monthly EMIs or EMI tenures of borrowers servicing repo-linked floating rate home loans.

According to SBI Research, the upcoming July 2025 CPI inflation data is set to breach the lowest ever historical print.

"We expect average CPI inflation for FY26 would be around 3.0%-3.2% (RBI:3.7%) as against FY25 average of 4.6%," SBI Research said in its latest report.

Given the benign inflation expectations, the report predicts that the central bank may reduce the repo rate by another 25 bps sooner than later.

"With a firmly benign inflationary trend envisaged going ahead, notwithstanding the tumult on part of trade led restrictions and non-linear pass-through of such vagaries, the plot seems to be spiced with a further 25 bps rate cut (sooner than later) to give an adrenaline boost to the economic juggernaut as global developments necessitate us to build today for future," it said.

The report noted that the current focus of the RBI is to support the momentum in capital formation for more durable growth. In the last MPC, the RBI had also decided to remain "data-dependent to chart the future course of monetary policy and strike the appropriate growth-inflation balance", the report said.

In June 2025, India’s CPI inflation moderated to a 77-month low of 2.10%, compared to 2.82% in May 2025 and 5.08% in June 2024.

The decline in CPI inflation in June is mainly due to a decline in food inflation, which is currently at a 77-month low of –0.20%. There has been a continued decline in food items, especially vegetables, pulses, and spices.

Home loan borrowers to benefit

The next RBI Monetary Policy Committee (MPC) meeting is scheduled to take place in August.