RBI cuts rates, turns ‘accommodative’ as economy slows

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RBI-1Mumbai: The Reserve Bank of India cut its policy interest rate by 25 basis points in a widely expected move on Thursday, while also changing its policy stance to “accommodative,” after latest data showed the economy growing at its slowest in over four years.

“A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern,” the bank’s monetary policy committee (MPC) said in a statement after making its third cut since February.

Entering its second term following a landslide election victory last month, Prime Minister Narendra Modi’s government is expected to launch a fresh wave of economic reforms to unlock the growth after the unemployment rate rose to a multi-year-high of 6.1% in the 2017/18 fiscal year.

Asia’s third largest economy grew at a much slower-than-expected 5.8% in the last quarter, far below the pace needed to generate jobs for the millions of young Indian’s entering the labour market each month.

The reduction in the repo rate to 5.75 percent matched predictions by 44 of 66 analysts polled by Reuters. The reverse repo rate was reduced to 5.50 percent. The MPC cut rates by the same amount at its last two meetings.

All six of the panel voted for a 25 basis points cut, and for the stance to be changed to “accommodative” from “neutral”.



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