Back-to-Back Central Bank Rate Cuts in India Reverse Last Year’s Increases

April 4, 2019

Officials at the Reserve Bank of India cut its repo rate and reverse repo rate each by 25 basis points to 6.0% and 5.75%, respectively. The cuts were decided by a 4-2 voting margin, with two dissents favoring no change. Reductions of 25 basis points had also been implemented after the prior policy review in February, and they reverse a pair of hikes last year in June and August. Central bank officials released as statement, citing a global slowdown, a benign inflation outlook, and the fact that policy normalization programs at other key central banks had been paused. Officials left the central bank’s cash reserve requirement unchanged at 4.0%. And while one policymaker sought to switch forward guidance from the current neutral status (equal risks of rising or falling), the majority voted not to change that signal. The projected GDP growth rate this fiscal year was revised marginally lower to 7.2%, and CPI inflation is seen drifting upward but still staying below 4.0% at the end of the fiscal year. Monetary officials in India meet on a bi-monthly basis.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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