RBI cuts REPO rate

RBI cuts REPO rate

Governor Shaktikanta Das


The Reserve Bank of India, the country’s Regulator reduced the key interest by a quarter point for the second time this year which was quite expected.  However, the regulator kept silent on their outlook on the future course of action, inspite of the reducing inflation trend and economic growth forecasts.

The Governor Shaktikanta Das announced the above and further added the following:

  • He hinted that liquidity measure may also be tempered
    • Given the record amount of bond purchases during last fiscal and
    • Deployment of new dollar-rupee swap deals for USD 10 billion resulting in an appreciable cash availability.
  • The Governor also added that there was scope for further rate cuts due to
    • a positive note on real interest rates which is 3 percentage points and
    • a favourable trend in the inflation outlook.
  • However, the forthcoming general elections raises prospect of an adverse fiscal implications down the line.
  • The output gap remains negative and domestic economy is facing headwinds, especially on the global front the Governor added.
  • There is a need to strengthen domestic growth impulses by encouraging private investment which is quite inactive.

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