RBI cuts rates, shifts focus to backing growth

The Reserve Bank of India (RBI) on Thursday cut the policy repo rate by 25 basis points to 6.25% in a bid to revive economic growth as it projected retail inflation to remain below its target of 4% for the next 12 months. The rate reduction was the first since August 2017. The RBI also simultaneously changed the stance of the policy to ‘neutral’ from ‘calibrated tightening’, which indicates that the central bank remains ready to move in either direction based on incoming data. The move will enable banks to lower their lending rates. While all six members of the monetary policy committee voted in favour of a change in the stance, the vote for a rate reduction saw two members breaking with the majority view by backing the status quo. While some market participants had factored in a rate cut, there was near unanimity that the RBI would shift its stance given the softening inflation. Interestingly, this is the first time since the MPC was set up in October 2016 that the Governor and the Deputy Governor voted differently. While RBI Governor Shaktikanta Das backed a rate cut, Deputy Governor Viral Acharya voted to stand pat. Mr. Das observed that the acceleration in consumer price inflation in December was the slowest in 18 months.

Source  : https://www.thehindu.com/todays-paper/rbi-cuts-interest-rates-shifts-focus-to-supporting-growth/article26209373.ece

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