In the first monetary policy review of the current financial year, the Reserve Bank of India has cut the repo rate by 25 basis points or 0.25 percent. The announcement was made on Thursday 4th April. RBI’s repo rate is now 6 percent meeting a majority of economists’ expectations. There is a neutral stand on monetary policy.
Four of the six members of the Monetary Policy Committee took a decision to cut policy rates. While two members supported to keep the repo rate stable. The Reserve Bank predicted a GDP growth of 7.20 percent for the financial year 2019-20.
The Reserve Bank reduced the revised estimate of retail inflation to 2.40 percent in the fourth quarter of the financial year 2018-19.
WHAT IS REPO RATE?
Repo rate is the key interest at which RBI lends short loans to banks mainly commercial banks. In a poll conducted News agency Reuters nearly 70 economists expected that the RBI would cut the benchmark lending rate by 25 bases to 6.00 percent on 4th April.
STATEMENT OF RBI
The Central bank considered the factors including the monsoon of 2019. They announced the reduction in the forecast of inflation based on the consumer price index. For the fourth quarter of the fiscal year, 2018-19 is 2.40 percent and the first half of 2019-20 is 2.9-3.0 percent.
For the last half of the 2019-20 has been reduced to 3.5-3.8 percent. Earlier, after the February meeting, the Reserve Bank had forecast the retail inflation to be between 3.2 to 3.4 percent in the first half of 2019-20. The Reserve Bank said in February, the Consumer Price Index-based inflation based on food and fuel prices was lower than expected. Which suggested a way to reduce forecasts of major inflation.
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