Reserve Bank’s New Chief Delivers Surprise Rate Cut

Business

The Reserve Bank of India unexpectedly cut its benchmark interest rate in Governor Shaktikanta Das’s debut policy meeting, becoming the first in Asia to ease borrowing costs this year as inflation remains benign.
The repurchase rate was reduced by 25 basis points to 6.25 per cent, a decision predicted by just 11 of 43 economists surveyed by Bloomberg News, with the rest expecting no change. The six-member Monetary Policy Committee voted unanimously to switch its stance to neutral from ‘calibrated tightening’ adopted in October.

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.

“It is vital to act decisively and in a timely manner to address the objective of growth once price stability as defined in the Act is achieved,” Mr Das told reporters in Mumbai, referring to the central bank’s inflation targeting mandate. “The shift in stance from calibrated tightening to neutral provides flexibility to address, and the room to address, sustained growth of India’s economy over the coming months as long as inflation remains benign.”

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