RBI cuts repo rate by 25 basis points to 6.25%

RBI cuts repo rate by 25 basis points to 6.25%

The monetary policy committee of the Reserve Bank of India has set itself up for another rate cut by lowering its estimates for 2019-20 inflation target as well as those for 2018-19, ignoring by and large the inflationary impact of the budget.

India's central bank on Thursday unexpectedly lowered interest rates and, as anticipated, shifted its stance to "neutral" from "calibrated tightening" to boost a slowing economy after a sharp fall in the inflation rate. This was the first monetary policy review for the former economic affairs secretary, who took over as RBI Governor in the second week of December 2018.

Sonal Varma, chief India economist at Nomura Holdings Inc.in Singapore, said the RBI's autonomy wasn't at issue this time around.

RBI Governor Shaktikanta Das cut the interest rate by 0.25 percent to 6.25 percent, a move that will lead to reduction of lending rate by banks leading to lower EMI for housing, auto loan and corporate borrowers.

However, economists were divided if a rate cut will be announced, citing core inflation of over 5 per cent as well as the fiscal slippage in the Union budget.

Shaktikanata Das-led Reserve Bank of India (RBI) has reduced its lending rate by 0.25 per cent to 6.25 per cent with the monetary policy committee voted 4:2 in the favour of a rate cut.

This was also the last meeting of the MPC before the Election Commission announces the dates for the Lok Sabha elections. The MPC is mandated to target headline inflation based on the consumer price index (retail inflation) and that fell to an 18-month low of 2.19% in December, staying below the medium-term target of 4% for five consecutive months.

Usually when RBI cuts repo rate, banks typically pass on the benefit to the customers.

"The central bank's commentary on inflation and growth support a dovish outlook for the policy", said Shashank Mendiratta, an economist with IBM in New Delhi, adding "The macro backdrop as such supports the RBI's stance". Deputy Governor Viral Acharya and another MPC member, Chetan Ghate, voted for status quo in interest rates, while Shaktikanta Das and three others voted for a cut in interest rates.

Statistics showed the economy expanded only 7.1 per cent on-year in July-September, down from 8.2 percent in the previous quarter.

The decision "restores growth maximisation as a secondary objective of the RBI".

"To see this as a capitulation of the government's demands is profoundly misguided", said Abheek Barua, chief economist of HDFC Bank.

Thursday's move was the first rate cut since August 2017.

The rupee weakened to 71.69 to the dollar immediately after the decision, but it later strengthened to 71.42.



Related Posts

Wizards trade Otto Porter to Bulls for Bobby Portis, Jabari Parker
Portis recently told reporters that he hoped to remain with the team for the long term through its rebuilding process. Expect the Wizards to remain active through Thursday's deadline to shed more salary and get out of the tax entirely.

Spotify solidifies foothold in podcasting with acquisitions of Gimlet, Anchor
In the company's earnings report , Spotify shared its plans to spend $400 to $500 million on new properties this year. Anchor, also based in NY , is a platform that provides tools for podcasters to monetize and distribute their programs.

Nick Foles informing Eagles he is voiding option
It is going to be tough to pull off, but financially, it is far easier for the Eagles to pull off than many think. There's a couple ways to look at this situation if Gettleman were to go after Foles for next season.

Iran hits back at Trump anti-Semitism accusations
Trump apparently was referring to the Al-Asad air base in western Iraq, where he paid a brief visit to USA forces in December. Trump last month claimed the ISIS had been defeated in Syria and said all U.S. troops were "coming back now".

Nantes consider legal action against Cardiff over Sala transfer payment
According to the BBC , Cardiff have withheld the first scheduled payment until they are satisfied with the documentations. The families of Sala, Cardiff City's record signing at £15 million, and Ibbotson have been informed of the discovery.

Hazard makes decision on Chelsea future
Paris Saint-Germain forward Neymar is Real Madrid's top summer transfer target, which could threaten Eden Hazard's hopes of a move to the Bernabeu club.

OPEC's oil exports to USA fell to five-year low in January
Global benchmark Brent crude dropped almost 1% to $61.39 a barrel while WTI futures were down more than 1% at $53.12 a barrel. The producers' alliance, known as OPEC+, began cutting production from last month to avert a new supply glut.

Ariana Grande pulls out of Grammys 'over fights with show bosses'
Grande also likely wants to use the platform to promote her new album " Thank U, Next ", featuring that track. Variety alleges that "such stipulations were not imposed on other performers at the show".

Rockets Acquire Iman Shumpert, Kings Get Alec Burks In Three-Way Trade
This trade allows them to flip some of their young players while receiving a first round pick in this upcoming draft. Trading a first round pick is not something Daryl Morey usually does, but he's all in this year for the Rockets.

Oil price surges amid OPEC cuts & USA sanctions against Venezuela
US President Donald Trump said in his State of the Union address that a trade deal was possible with China. International Brent crude oil futures were down by 26 cents, or 0.4 per cent, at $62.43 per barrel.

© 2015 . All Rights reserved.