RBI cuts FY20 GDP target to 6.1% vs 6.9% forecasted earlier

NEW DELHI: The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India on Friday slashed the short-term lending rate, repo rate, by 25 basis points in its fourth bimonthly policy review. The domestic stock market saw a sudden fall in response to the money policy outcome and the BSE Sensex traded 66 points higher at 38,172 after the policy announcement. The index was up 200 points in early trade. This was the fifth consecutive rate cut effected by the Shaktikanta Das-led panel, and it was in addition to a cumulative 110 basis points rate cut that RBI has announced so far this year. The repo rate now stands at 5.15 per cent, the lowest since March 2010. The rate cut came much in line with expectations, as benign inflation expectations offered policymakers room to try and revive a slowing economy. Retail inflation for August stood at 3.21 per cent, and the government’s recent measure to ban onion exports helped ease some concerns any imminent spike in food inflation. A volatile global trade scenario and uncertain geopolitical environment, which led to the weakening of demand globally, are some of the other reasons favoured a rate cut.Globally also, commentaries by central banks have been largely dovish. “Global rates are cycling down with our US economists expecting the Fed to cut another 50 bps by December,” BofA-ML said on Thursday. Two Fed policymakers on Thursday signalled they were open to delivering another rate cut after a report showed the growth in the US services sector is slowing, pushing the Dow Jones Industrial Average up 122.42 points, or 0.47 per cent, to 26,201.04 and the S&P500 index by 23.02 points, or 0.80 per cent, to 2,910.63. For India, the brokerage said that the rate cut should immediately reduce lending rates on retail and SME loans that are now linked to external benchmarks like the RBI repo rate.

from Economic Times https://ift.tt/2pM3I75