RBI cuts repo rate by 25 basis points to 6.25%

The Central bank changes its policy stance from 'calibrated tightening' to 'neutral'

February 07, 2019 11:57 am | Updated November 28, 2021 09:35 am IST - Mumbai

The RBI has revised the projection for CPI inflation downward.

The RBI has revised the projection for CPI inflation downward.

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to reduce the key policy rate or the repo rate by 25 bps to 6.25% in the last bimonthly policy review of 2018-19 while changing the policy stance to 'neutral' from 'calibrated tightening'.

The rate cut is in line with expectations as retail inflation grew by 2.2% in December its slowest in the last 18 months.

While the decision to change the policy stance was unanimous, four out of six members voted for a rate cut while two opted for status quo. This was the first policy under the new Governor Shaktikanta Das.

While reducing the interest rate, the Central bank said headline inflation is projected to remain soft in the near term reflecting the current low level of inflation and the benign food inflation outlook.

 

“Continuing deflation in food items, a sharp fall in fuel inflation and some edging down of inflation excluding food and fuel contributed to the decline in headline inflation,” the RBI said.

Observing that actual inflation in the third quarter of 2018-19 was marginally lower than what was projected, the RBI said, “There have been downward revisions in inflation projections during the course of the year, reflecting mainly the unprecedented soft inflation recorded across food sub-groups.”

Going ahead, the RBI said, the short-term outlook for food inflation appears particularly benign, despite adverse base effects.

The RBI has revised the projection for Consumer Price Index (CPI) inflation downward.

“Taking into consideration these developments and assuming a normal monsoon in 2019, the path of CPI inflation is revised downwards to 2.8% in Q4:2018-19, 3.2-3.4% in H1:2019-20 and 3.9% in Q3:2019-20, with risks broadly balanced around the central trajectory,” it said.

GDP growth for 2019-20 is projected at 7.4% — in the range of 7.2-7.4% in H1, and 7.5% in Q3 — with risks evenly balanced.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.