Sunday, 17 February, 2019

RBI Slashes Repo Rate by 25 Basis Points, Changes Stance to 'Neutral'

Home auto loans set to be cheaper as RBI Governor Shaktikanta Das cuts interest rates by 0.25 RBI Policy: MPC Cuts Repo Rate by 25 Basis Points to 6.25%
Laurie Berry | 07 February, 2019, 17:00

This was the first policy of RBI Governor Shaktikanta Das, who heads the MPC.

He announced a number of high-profile policies, including the introduction of a new single tax on goods and a controversial currency ban.

The cut came nearly a week after Modi's administration unveiled an expansionary budget, which included $13 billion of help for consumers ahead of the poll that's due by May, and days after an adviser to the prime minister said the RBI should ease policy.

The last rate cut by the RBI, to 6.00 percent, was in August 2017. The central bank has also changed its monetary policy stance to "neutral" from "calibrated tightening" as inflation stood below the central bank's 4 per cent target.

Emboldened by a slowdown in inflation, the MPC under the new governor showed more concern about economic growth risks, paving the way for more rate cuts.

Assuming a normal monsoon in 2019, headline inflation estimates are revised downwards to 2.8 per cent in Q4, FY19, 3.2-3.4 per cent in the first half of FY20 and 3.9 per cent during the third quarter of FY20, with risks broadly balanced around the central trajectory. As headline inflation is way below target, MPC could have given 50 bps relaxation to industry. But in the current juncture, that may not be the case for two reasons. The repo rate cut will lead to a decrease in EMIs on Home Loans, Car Loans and Personal Loans as the banks would likely decrease the interest rates.

College student finds man in her closet
Maddie , of North Carolina , US, who preferred not to reveal her surname, said she first heard a noise coming from the closet. The college student opened the door to the walk-in closet to find a man with long blonde hair inside, wearing her clothes.

The central bank also noted that "the output gap has opened up modestly as actual output has inched lower than potential".

Patel's exit prompted some to fret the RBI's independence was under threat, but some economists argued that Thursday's decision should not be read as a surrender to pressure.

The six-member MPC, headed by Reserve Bank of India Governor Shaktikanta Das, began its meeting on Tuesday and announced its decision on Thursday. That sends the message clear to lenders.

The repo rate is the rate at which the Reserve Bank lends short-term money to the banks, while the reverse repo rate is the rate at which the central bank borrows money from commercial banks.

Analysts say India needs to regularly record growth of at least eight percent to generate employment for the millions entering the workforce each year.

In his first presser after taking over the charge at RBI, Das had made it clear that the RBI also can't ignore growth worries in the economy. "Investment activity is recovering supported mainly by public spending on infrastructure", RBI Governor said. "The need is to strengthen private investment activity and buttress private consumption".

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