In line with market expectations, the RBI has reduced the repo rate by 25 bps to 5.75% in its monetary policy meeting today. This was the third time in a row that the central bank has cut the repo rate.
Moreover, the central bank changed its monetary policy stance to ‘accommodative’ from ‘neutral’ that means RBI would be open to consider rate cuts in the upcoming monetary policy meetings.
All six members of the MPC unanimously decided to reduce the policy repo rate and change the stance on monetary policy.
Concerns over slowing growth largely influenced RBI’s rate-cut decision. The central bank revised India’s growth projection for FY 2019-20 to 7% from the earlier projection of 7.2%.
Expectation of subdued inflation also prompted the central bank to opt for the dovish turn. For FY 2019-20 (Apr-Sep), the central bank now expects the headline inflation to be in the range of 3-3.1%, as against the forecast of 2.9-3% in its April policy. For FY 2019-20 (Oct-Mar) the RBI expects CPI to be in the range of 3.4-3.7%, as against the April projection of 3.5-3.8%.
