New Delhi, June 7 -- The Reserve Bank of India (RBI) surprised markets by frontloading its monetary easing with a 50-basis point rather than the consensus 25-basis point repo rate cut on Friday. One basis point is one hundredth of a percentage point. By changing the policy stance from accommodative to neutral, it has also sent a signal that there could be no more rate cuts in the near-term. What explains these decisions by the central bank? What do they mean for the Indian economy? Here are some charts that try to answer this question. After Friday's decision, the repo rate now stands at 5.5%, the lowest it has been since August 2022 when it was at 5.4%. The current monetary easing cycle, which began with a 25-basis point cut in February 2025, has now cumulatively administered a 100-basis point rate cut. As far as a policy stance is concerned, the RBI has changed it back to neutral after just a two-month window of an accommodative stance, making it the shortest accommodative policy stance since the inflation targeting framework was adopted in October 2016. To be sure, the RBI has described its stance-change action as frontloading of the monetary easing rather than some adverse development in the growth-inflation dynamics. See Chart 1: Repo rate and policy stance Data from the Centre for Monitoring Indian Economy (CMIE) database on weighted average lending rates (WALR) of scheduled commercial banks shows this clearly. The average WALR was 9.86% in December 2024 when the repo rate stood at 6.5%. By April 2025, the latest period for which data is available in the CMIE database, the repo rate had come down to 6% but the WALR had only fallen to 9.68%. To be sure, the transmission effect of reduction in repo rates always takes time to translate into retail rates. Governor Sanjay Malhotra acknowledged this in his written statement issued after Friday's MPC. "The comfortable liquidity surplus in the banking system has further reinforced transmission of policy repo rate cuts to short term rates. However, we are yet to see a perceptible transmission in the credit market segment, though we must keep in mind that it happens with some lag," the statement said. See Chart 2: Repo rate and WALR MPC's annual inflation and growth projections show this clearly. The MPC has brought down its inflation projection for 2025-26 in every meeting it has had in this calendar year. It was 4.2% in February, 4% in April and now stands at 3.7%. Growth projection on the other hand, saw a 20-basis point downward revision from 6.7% to 6.5% between February and April and has been retained there despite a frontloading of rate cuts. This is different from the condition last year when the MPC was making downward revision to growth forecasts even while making upward revisions to its inflation projections. "The inflation outlook for the year is being revised downwards from the earlier forecast of 4.0 per cent to 3.7 per cent. Growth, on the other hand, remains lower than our aspirations amidst a challenging global environment and heightened uncertainty. Thus, it is imperative to continue to stimulate domestic private consumption and investment through policy levers to step up the growth momentum", the MPC resolution says. See Chart 3: RBI growth and inflation projections While a repo-rate cut means that the MPC is pivoting towards the growth side of its mandate of balancing growth and inflation, and is perfectly justified in the current environment, it does not guarantee a higher growth rate. India saw this in the period before the pandemic when lower repo rates were accompanied by a slowdown in GDP growth for a few years. This only means that growth rate is an outcome of various factors and only weakly correlated with interest rates in the economy. It remains to be seen whether this monetary easing cycle manages to achieve its goal of boosting growth. To be sure, one could always argue that the growth performance could have been worse had interest rates not been reduced. See Chart 4: Scatter plot of repo rate and GDP growth...