Mumbai: The MPC (monetary policy committee) decided unanimously to reduce the policy rate by 25 basis points, from 6.5% to 6.25%: RBI Governor Sanjay Malhotra. Making a statement on Monetary Policy, RBI Governor Sanjay Malhotra says, “The MPC noted that inflation has declined, supported by a favourable outlook on food and continuing… MPC also decided unanimously again, to continue with the neutral stance and remain unambiguously focused on a durable alignment of inflation with the target while supporting growth…” Sanjay Malhotra further said, “The standing deposit facility, the SDF rate shall be at 6.0%, and the marginal standing facility rate, the MCF rate and the bank rate shall be 6.5%. Discussing global financial market dynamics, Malhotra pointed out that expectations regarding the size and pace of rate cuts in the United States had led to a strengthening of the US dollar. He said, “The global economic backdrop remains challenging. The global economy is growing below the historical average, even though high-frequency indicators suggest resilience, along with continued expansion in trade. Progress on global disinflation is stalling, hindered by services price inflation.” This, in turn, resulted in hardened bond yields and significant capital outflows from emerging markets, causing sharp currency depreciations and tighter financial conditions. He said, “With receiving expectations on the size and pace of rate cuts in the US, the US dollar has strengthened. Bond yields have hardened, emerging market economies have witnessed large capital outflows, leading to sharp depreciation of their currencies and tightening of financial conditions, divergent trajectories of monetary policy across advanced economies, lingering geopolitical tensions and elevated trade and policy uncertainties have exacerbated financial market volatility.” He also emphasized the impact of geopolitical tensions and policy uncertainties on market volatility, adding that such an unpredictable global environment has posed significant policy trade-offs for emerging economies. Despite these headwinds, Malhotra assured that the Indian economy remains strong and resilient, though not entirely immune to external pressures. “The Indian rupee has come under depreciation pressure in recent months,” he acknowledged. However, he reassured that the RBI is actively using all available tools to address the multifaceted challenges facing the economy. The MPC began its three-day meeting to discuss and set the new interest rates on February 5, 2025. Following this there shall be a reduction in interest on home loans. During the previous MPC meeting in December 2024, the RBI announced a 50 basis point cut in the cash reserve ratio (CRR), making it 4 per cent. However, it kept the benchmark repo rate unchanged at 6.5 per cent.