RBI Policy: MPC Cuts Repo Rate by 25 Basis Points to 6.25%

Posted February 08, 2019

"On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) made a decision to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.50% to 6.25% with immediate effect", the RBI said in a statement. Chetan Ghate and Viral V Acharya voted to keep the policy rate unchanged.

The bi-monthly meet under RBI Governor Shaktikanta Das saw the six-member MPC panel voting 4:2 in favour of the rate cut.

More news: San Francisco Giants Rumors: Bryce Harper signing a real possibility?

The Reserve Bank of India (RBI) reduced Repo rate by 25 basis points, now at 6.25 from 6.5 per cent on the basis of an assessment of the current and evolving macroeconomic situation.

The last rate cut by the RBI, to 6.00 percent, was in August 2017. In a widely anticipated move, it also shifted its policy stance from "calibrated tightening" to "neutral", suggesting more cuts could be on the horizon.

More news: Venezuela Military Uses Barricade to Stop Aid From Opposition

It expects the inflation numbers to print in at 2.8 percent in the March quarter, 3.2-3.4 percent in first half of the next fiscal and 3.9 percent in the third quarter of 2019-20. As headline inflation is way below target, MPC could have given 50 bps relaxation to industry. Most polled respondents expected the central bank to only change the stance, to neutral. While RBI's mandate is price stability (targeting inflation), the RBI Act also says that it needs to do so "keeping in mind the objective of growth", Das said then to make his point. Inflation estimates have been revised very sharply lower by the central bank, according to a Livemint report.

"Investment activity is recovering but supported mainly by public spending on infrastructure", the MPC said in a statement.

More news: Hongkongers enjoy spectacular performances at Lunar New Year night parade

The gross domestic product (GDP) growth is likely to be influenced by growth in bank credit and overall financial flows to the commercial sectors, though slowing global demand could play a dampener, said an RBI document released after the three-day meeting of the central bank's Monetary Policy Committee (MPC).