RBI cuts repo rate by 25 basis points to 6.25%

RBI cuts repo rate by 25 basis points to 6.25%

RBI cuts repo rate by 25 basis points to 6.25%

"On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) chose to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.50% to 6.25% with immediate effect", the RBI said in a statement.

The monetary policy committee said the rate cut is in consonance of achieving the medium term objective of maintaining inflation at the 4 per cent level while supporting growth. It was the first policy review by the RBI after appointment of its governor Shaktikanta Das in December a year ago.

Deputy Governor Viral Acharya and another MPC member, Chetan Ghate, voted for status quo in interest rates, while Das and three others voted for a cut in interest rates.

India's central bank unexpectedly lowered interest rates on Thursday in a move that will likely be welcomed by Prime Minister Narendra Modi who wants to boost lending and economic growth as his government gears up for parliamentary elections later this year.

Commenting on the RBI rate cut, Ankur Dhawan- Chief Investment Officer-PropTiger.com, said "Industry was expecting a bigger rate cut than announced".

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"The 25 bps reduction in repo rate taken together with the shift in RBI's stance from "calibrated tightening" to a "neutral approach", would go a long way in lifting sentiment among businesses", CII President Rakesh Bharti Mittal said.

In a statement, the policy committee cited slowing global growth and emphasized falling consumer price inflation among its reasons for the more dovish stance.

The central bank also cut its estimates on headline inflation, which cooled off to an 18-month low of 2.2 percent in December, for the next year.

RBI Governor Shaktikanta Das said, "we are constantly & continuously monitoring the liquidity situation and based on the requirement we will ensure that there is no liquidity scarcity". Investment activity is recovering but supported mainly by public spending on infrastructure.

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