Reserve Bank of India Cut The Reverse Repo Rate By 25 Bps To 5.75 Percent

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The Reserve Bank of India on today used the room provided by slumping inflation to cut its main policy rate according to a report by Reuters

The rate cut is the RBI’s first since one of the same sizes in October and a show of confidence in a country that has experienced a surge in foreign investments into debt and shares this year.

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Cutting the repo rate by 25 basis points to 6.00 percent – the lowest since November 2010 – had been widely anticipated as a slump in food prices sent June consumer inflation to a more than five-year low of 1.54 percent.

The RBI said reduced prices provided “some space” for monetary policy accommodation: inflation is now well below the RBI’s 4 percent target and its projection of 2.0-3.5 per cent in April-September.

The rate cut will likely ease some of the pressure from the government and markets for action to lift the economy, which had annual growth in January-March of 6.1 percent – fast by global standards but India’s lowest number in over two years.