India’s central bank cuts interest rate to give growth a chance
- This is India's first rate cut in 18 months.
- Furthermore, the central bank changed its stance to “neutral”, indicating a possibility of another rate cut in the next few months.
- After retail inflation crashed to a 18-month low in December 2018, it was widely expected that the RBI would have enough leeway to cut rates this month.
The Reserve Bank of India (RBI) opted to cut
View all Offers
View all Offers
- 55% OFF
Glun Multipurpose Portable Electronic Digital Weighing Scale Weight Machine (10 Kg - with Back Light)₹ 358₹ 798Buy On
- 48% OFF
Pigeon by Stovekraft Amaze Plus Electric Kettle with Stainless Steel Body, 1.5 litres boiler for Water, instant noodles, soup etc.₹ 625₹ 1195Buy On
- 40% OFF
Prestige Electric Kettle PKOSS - 1500watts, Steel (1.5Ltr), Black₹ 748₹ 1245Buy On
- 49% OFF
VR 18 Pcs - 3 Different Size Plastic Food Snack Bag Pouch Clip Sealer Large, Medium, Small Plastic Snack Seal Sealing Bag Clips Vacuum Sealer (Set of 18, Multi-Color) (Multicolor)₹ 153₹ 299Buy On
- 46% OFF
Pigeon by Stovekraft Cruise 1800 watt Induction Cooktop (Black)₹ 1728₹ 3193Buy On
Markets had already run up on Wednesday hoping for this slash in interest from the RBI. Benchmark indices, Sensex and Nifty, continued to hold on to the gains after the decision.
TOP VIDEOS FOR YOU
After retail inflation crashed to a 18-month low in December 2018, it was widely expected that the RBI would have enough leeway to cut rates this month after having to hike rates consecutively in June and August last year and maintaining a “calibrated tightening” stance in December.
In June 2018, the central bank hiked rates for the first time in four years in response to higher inflation and a depreciating rupee - both of which were a outcome of rising fuel prices.
The last time the RBI opted for monetary tightening was in January 2014, when it increased the repo rate to 8% to keep inflation in check. It had since reduced interest rates to support economic growth amid a global decline in oil prices.
As fuel and food prices have moderated in recent months, the latter due to oversupply in the agricultural sector, inflation has been consistently trending downwards. Furthermore, having stalled at 3.6% for 2018-19 and 2019-2020, retail inflation is well below the RBI’s target of 4%, which had raised the prospects for a rate cut.
AdvertisementExcluding food and fuel, core inflation has hovered around the 6% owing to higher medical and education costs. The divergence across different inflation baskets has caused the RBI to opt for conservatism when it comes to interest rate decisions.
With the inflation outlook subdued, amid lower crude prices, the RBI likely felt the need to cut rates to spur economic growth. More importantly, ahead of national elections in May, a reduction in the cost of home loans and short-term loans for working capital is expected to lead to higher consumer and business confidence.
Markets just can't believe India's latest budget math
Here’s why the Reserve Bank of India hiked interest rates for the first time since January 2014
- Let budget bring resurgence, TN CM Stalin advises officials
- Tokyo Olympics: PV Sindhu bags bronze medal in women's singles badminton for India
- GST revenue collection for July rises by 33% with ₹1,16,393 crore
- Policy ignition: India's satellite navigation sector set for higher growth trajectory
- COVID-19 cases in Kerala are spiking due to good detection, better reporting and early easing of restrictions