Reserve Bank of India cuts repo rate by 25 bps to 6%
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In its last policy meet (February) and the first under Governor Shaktikanta Das, the central bank had lowered the repo rate by 25 basis points (bps) or 0.25 percent to 6.25 percent and changed the policy stance to neutral from calibrated tightening, adopted in October policy meet last year.
Repo rate is the rate at which the RBI lends money to the commercial banks, in case of any shortfall of funds.
The MPC voted 4:2 in favour of the 25 basis point (bps) rate cut.
Consequently, the reverse repo rate stands at 5.75 percent.
The stance of the policy was kept neutral with 5:1 vote.
Most economists and market experts had forecast a rate cut amid benign inflation and slowdown in growth both at home and abroad. Inflation has remained below the RBI’s 4 percent target for seven straight months but core inflation, which excludes food and fuel, is running closer to 5.5 percent.
A rate cut just a week before the start of seven-phase Lok Sabha elections is crucial for the ruling NDA party.
“Banks are not willing to cut rates as deposits and household financial savings are at historical lows," Bloomberg reported quoting Prachi Mishra, the chief India economist at Goldman Sachs Group Inc. Only eight banks have cut their lending rates by 5-10 basis points so far, she added.
Karthik Srinivasan, group head - financial sector ratings at ICRA, says, "the scope for further rate cuts will be driven by fiscal policies of the new government, monsoon and subsequent revision in the inflation forecasts, the clarity on which is likely to emerge over next few quarters only."
The committee projected FY20 GDP growth at 7.2 percent. Q4FY19 CPI inflation is seen at 2.4 percent, the statement added.
CPI inflation has been revised downwards to 2.4 percent in Q4 of 2018-19, 2.9-3.0 percent in the first half of 2019-20 and 3.5-3.8 percent in the second half of 2019-20. #Casansaar (Source:- business standard )
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