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RBI Cuts Repo Rate By 0.25%, Changes Policy Stance To 'Neutral'

7 Feb 2019 11:59 am
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MUMBAI (Commoditiescontrol) - The Reserve Bank of India on Thursday unexpectedly cut interest rates and shifted its monetary policy stance to "neutral" from "calibrated tightening" signalling further softening on its approach towards interest rates.

In the first policy review under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut, while the decision to change policy stance was unanimous.

Benchmark interest rate/repo rate was cut by 0.25 percent to 6.25 percent, a move that would result in lower cost of borrowing for the banks that are expected to transmit the same to individuals and corporates.

The RBI cut its estimates on headline inflation - which cooled off to a 18-month low of 2.2 percent in December - for the next year, and expects the number to come at 2.8 percent in March quarter, 3.2-3.4 percent in first half of next fiscal and 3.9 percent in third quarter of FY20.

"Headline inflation is projected to remain soft in the near term, reflecting the current low level of inflation and the benign food inflation outlook," the MPC resolution said, adding "we need to be watchful of vegetable prices, oil prices, trade tensions, health and education inflation, financial market volatility and monsoon outcomes".

The rate cut is in consonance of achieving the medium term objective of maintaining inflation at the 4 percent level while supporting growth, it said.

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.

(By Commoditiescontrol Bureau)


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