Reserve Bank of India Cuts Repo Rate by 25 Basis Points

April 21, 2009

Somewhat unexpectedly, the Reserve Bank of India announced a sixth rate cut since last October, reducing its repo rate by 25 basis points to 4.75% and its reverse repo rate by the same magnitude to a record low 3.25%.  The action was taken in connection with the scheduled release of the annual monetary policy review.  A statement released by officials describes a deeper-than-expected slowdown typical of most emerging markets, rebukes banks for not passing on past central bank rate cuts more fully, cuts projected growth to 6.5-6.7% this financial year from a prior forecast of 7%, and predicts growth of 6% next fiscal year.  Previous rate cuts by the RBI amounted to 100 bps last October 20, 50 bps on November 3, 100 bps on December 6, 100 bps on January 2, 2009 and 50 bps on March 4th.  Today’s statement strongly hints that the down-cycle in central bank rates, totaling 425 basis points thus far, has not ended.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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