40-Basis Point Indian Central Bank Interest Rate Cut on Top of March’s 75-Basis Point Reduction

May 22, 2020

The Reserve Bank of India Monetary Policy Committee also held an emergency policy review ahead of the regularly scheduled one previously set for early June. The Committee announced a 40-basis point reduction of its repo rate to 4.0%, which follows a previous 75 basis point cut in late March. Officials released a statement enumerating a variety of other regulatory steps and laying out its logic behind the new actions:

The MPC is of the view that that the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated. Beyond the destruction of economic and financial activity, livelihood and health are severely affected. Judging that the risks to growth are acute, while the risks to inflation are likely to be short-lived, the MPC believes that it is essential now to instill confidence and ease financial conditions further. This will facilitate the flow of funds at affordable rates and rekindle investment impulses.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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