RBI reduces repo rate by 50 basis points

 

Today Reserve Bank of India (RBI) surprises by lowering the repo rate by 50 basis points. RBI has 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. RBI reduces repo rate by 50 basis points

It kept the CRR unchanged at 4 percent. This marks the fourth repo rate cut by the RBI since January 2015. Unlikely the last review policy, today Rajan provided much-needed booster shot to the economy by lowering the benchmark repo rate by 50 basis points.

 

The repo rate was last at 6.75 percent in March 2011. The RBI governor has been under pressure from the finance ministry as well as the industry to cut interest rate to spur economic recovery.

 

Rajan highlighted that the January 2016 target of 6 per cent inflation is likely to be achieved. Inflation looks set to undershoot the government’s projection of 6 per cent inflation by January 2016.

 

The repo rate, the rate at which the central bank lends to banks has been cut by 125 basis points this year. However, this is the first to be announced at a policy review, the first two cuts of 25 bps each in January and March were both outside of the policy review schedule.

 

The Reserve Bank will continue to be vigilant for signs that monetary policy adjustments are needed to keep the economy on the target disinflationary path,” RBI explained.