RBI: Repo rate reduced by 25 basis points

RBI: Repo rate reduced by 25 basis points

Ahead of the policy, opinion was divided on whether RBI would cut rates and economists had cited many reasons for the central bank to stay put; the budget was expansionary and easing would put pressure on prices, RBI's policy stance of "calibrated tightening" and the fact that banks needed to attract Rs 20 lakh crore of deposits to fund credit needs according to a Crisil report.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.0 per cent, and the marginal standing facility rate and the Bank Rate to 6.5 per cent. The six-member Monetary Policy Committee voted unanimously to switch its stance to neutral from "calibrated tightening" adopted in October.

The monetary policy committee said the rate cut is in consonance of achieving the medium term objective of maintaining inflation at the 4 per cent level while supporting growth.

Commenting on the RBI rate cut, Ankur Dhawan- Chief Investment Officer-PropTiger.com, said "Industry was expecting a bigger rate cut than announced".

He sees upside risks to inflation, which may prevent the central bank to cut rates this time around. "Change of stance to neutral is positive as it means we can look forward to future rate cuts".

Measles Outbreak Appears To Be Increasing Vaccination Rates
Only two provinces, Ontario and New Brunswick, require children to have updated vaccination records in order to enter school. Ukraine reported the highest number of measles cases past year - more than 10 times that of the next highest, Serbia.

"Headline inflation is expected to remain contained below or at its target of 4%". He, however, added that the RBI's track record in projection inflation accurately is no different from the experience of global central banks, who have also seen inflation veer off the expected track in recent years. The RBI has forecast inflation to be in the range of 3.2-3.4 per cent in April-September 2019, lower than its earlier prediction of 3.8-4.2%.

Four of six members of the MPC voted to cut the rates, while all six voted for a change in the stance.

The MPC meeting - the first for Das as governor - was closely watched after tension between the RBI and the government prompted his predecessor Urjit Patel to abruptly quit in December, amid government demands to relax lending curbs and hand over surplus reserves.

Deputy Governor Viral Acharya and another MPC member, Chetan Ghate, voted for status quo in interest rates, while Das and three others voted for a cut in interest rates.

The Reserve Bank of India (RBI) Governor Shaktikanta Das arrives to attend a news conference after a monetary policy review in Mumbai, February 7, 2019. The governor also indicated that there was scope for further rate cuts this year if prices do not rise.

Related Articles