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Reuters
MUMBAI
The Reserve Bank of India (RBI) on Thursday unexpectedly lowered interest rates and, as anticipated, changed its policy stance to “neutral” to boost a slowing economy after a sharp slide in the inflation rate.
The cut is welcome news for Prime Minister Narendra Modi’s government, which wants to boost lending and lift growth as it faces elections by May.
India’s new RBI governor Shaktikanta Das “has delivered what the Modi government was hoping for,” said Mark Williams, chief Asia economist of Capital Economics, in a note.
The RBI’s monetary policy committee (MPC) cut the repo rate by 25 basis points to 6.25 percent, as forecast by 21 of 65 analysts polled by Reuters. Most respondents had expected the central bank to only change the stance, to neutral from “calibrated tightening”.
If inflation remains muted, Das hinted there is more room to cut rates, sounding a markedly more dovish tone from the central bank.
“In the 12-month horizon, if we see that inflation remains at 3.9 or maximum of 4 percent or below, then I think there is a room to act,” Das told reporters after Thursday’s decision.
MUMBAI
The Reserve Bank of India (RBI) on Thursday unexpectedly lowered interest rates and, as anticipated, changed its policy stance to “neutral” to boost a slowing economy after a sharp slide in the inflation rate.
The cut is welcome news for Prime Minister Narendra Modi’s government, which wants to boost lending and lift growth as it faces elections by May.
India’s new RBI governor Shaktikanta Das “has delivered what the Modi government was hoping for,” said Mark Williams, chief Asia economist of Capital Economics, in a note.
The RBI’s monetary policy committee (MPC) cut the repo rate by 25 basis points to 6.25 percent, as forecast by 21 of 65 analysts polled by Reuters. Most respondents had expected the central bank to only change the stance, to neutral from “calibrated tightening”.
If inflation remains muted, Das hinted there is more room to cut rates, sounding a markedly more dovish tone from the central bank.
“In the 12-month horizon, if we see that inflation remains at 3.9 or maximum of 4 percent or below, then I think there is a room to act,” Das told reporters after Thursday’s decision.
