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RELATED KEYWORDS: RBI Policy Review|RBI|Rate Cut
Raghuram Rajan surprises again, cuts repo rate by 50 bps to 4-year low
MUMBAI: The Reserve Bank of India on Tuesday cut its key repo rate by a bigger-than-expected 50 basis points (bps) to 6.75%, with inflation running at record lows and the economy in danger of slowing down.
Rajan kept the cash reserve ratio ( CRR) unchanged at 4%.
The RBI has already eased the policy rate by 75 bps so far this year.
The RBI governor has been under pressure from the finance ministry as well as the industry to cut interest rate to spur economic recovery.
"Since our last review, the bulk of our conditions for further accommodation have been met. The January 2016 target of 6 per cent inflation is likely to be achieved. In the monetary policy statement of April 2015, the Reserve Bank said that it would strive to reach the mid-point of the inflation band by the end of fiscal 2017-18. Therefore, the focus should now shift to bringing inflation to around 5% by the end of fiscal 2016-17," the RBI said.
A rate cut is being seen as a key trigger to boost investment demand in an economy where credit growth has dipped to a multi-year low.
Expectations for a rate cut surged after the release of data showing consumer inflation at a record low of 3.66 per cent in August.
Inflation looks set to undershoot the government's projection of 6 per cent inflation by January 2016.
The stuttering recovery in the growth rate lied behind the calls for the central bank to lower interest rates
Finance minister Arun Jaitley had been one of the biggest votaries of a rate cut and had repeatedly been pointing to the comforting factors that merit a fourth rate cut by RBI this year.
(With inputs from agencies)
Rajan kept the cash reserve ratio ( CRR) unchanged at 4%.
The RBI has already eased the policy rate by 75 bps so far this year.
"Since our last review, the bulk of our conditions for further accommodation have been met. The January 2016 target of 6 per cent inflation is likely to be achieved. In the monetary policy statement of April 2015, the Reserve Bank said that it would strive to reach the mid-point of the inflation band by the end of fiscal 2017-18. Therefore, the focus should now shift to bringing inflation to around 5% by the end of fiscal 2016-17," the RBI said.
A rate cut is being seen as a key trigger to boost investment demand in an economy where credit growth has dipped to a multi-year low.
Expectations for a rate cut surged after the release of data showing consumer inflation at a record low of 3.66 per cent in August.
Inflation looks set to undershoot the government's projection of 6 per cent inflation by January 2016.
The January 2016 target of 6% inflation is likely to be achieved: RBI Governor Raghuram Rajan pic.twitter.com/06tNnQuvn6
— ANI (@ANI_news) September 29,
2015
The economy expanded at a slower-than-expected annualized rate of 7 per cent in the April-June quarter. That is faster than China, but well below the government's target of 8 to 8.5 per cent for the year ending in March.The stuttering recovery in the growth rate lied behind the calls for the central bank to lower interest rates
Finance minister Arun Jaitley had been one of the biggest votaries of a rate cut and had repeatedly been pointing to the comforting factors that merit a fourth rate cut by RBI this year.
(With inputs from agencies)
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