RBI unexpectedly lowers benchmark rates

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The Reserve Bank of India (RBI) lowered the interest rates in the policy meeting which saw Shaktikanta Das debut as the new governor of the RBI, according to a report by Reuters.

Reserve-Bank- of India
RBI unexpectedly lowers benchmark rates

RBI cut its benchmark interest rates and changed its stance from calibrated tightening to neutral in order to boost an economy which has slowed down due to a huge dip in the inflation rate.

RBI reduced the repurchase rate by 25 basis points to 6.25%. The policy meeting constituted of a six-member Monetary Policy Committee where four out of six members, inclusive of Mr Michael Patra, ED at RBI, and Mr. Das, stood favourably for a cut in the repo rates. However, Mr. Chetan Ghatge, an external member, and Mr. Viral Acharya, Deputy Governor, were not in favour of the repo rates being cut. The month of December saw the inflation drop to an 18-month low of 2.2% which was well below RBI’s mid-term target of 4%.

The cut in the repo rates is brilliant news for Bhartiya Janta Party and Prime Minister Narendra Modi as the Government looks to boost lending and increase growth ahead of the elections scheduled in May.

The decision by RBI saw the Indian rupee drop to Rs.71.69 to the US dollar only to strengthen to Rs.71.42 later.

According to a Reuters poll, it is expected that RBI will cut interest rates again next quarter.

Sources: Reuters, NDTV, Moneycontrol, Times of India, Indian Express

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