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RBI Likely To Announce Cut In Key Interest Rate Today: 10 Things To Know

The Reserve Bank of India is expected to announce a reduction of 25 basis points in the key interest rate (repo rate).

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RBI Likely To Announce Cut In Key Interest Rate Today: 10 Things To Know

RBI repo rate is likely to fall to 6%.

The Reserve Bank of India (RBI) is expected to announce a reduction of 25 basis points (0.25 per cent) in the key interest rate to 6 per cent today. The central bank is due to release its first bi-monthly policy statement for financial year 2019-20 at 11.45 am. Any reduction in the repo rate, the key interest rate at which the RBI lends short-term funds to commercial banks, would mark the second reduction so far this calendar year, and also the second under Governor Shaktikanta Das, who assumed office in December last year.
Here are 10 things to know about RBI Monetary Policy:
  1. The six-member Monetary Policy Committee (MPC), headed by the RBI governor, began its three day review on Tuesday. Thursday's policy statement marks the last before the general election due later this month.
  2. More than 85 per cent of the nearly 70 economists polled by news agency Reuters expect the central bank to cut the benchmark lending rate to 6.00 per cent today.
  3. Economists say consumer inflation staying within the central bank's comfort zone leaves room for monetary easing.
  4. "We believe that RBI would go in for 25 bps rate cut to provide much needed thrust to the economic growth. In addition, inflation being well within the RBI's target would further provide an elbow room to the RBI to lower the interest rates," said credit ratings agency CARE in a note.
  5. Consumer inflation has remained within the RBI's medium-term target of 4 per cent for seven months in a row. Consumer inflation - gauged by the Consumer Price Index (CPI) - picked up to 2.57 per cent in February from the 19-month low of 1.97 per cent the previous month.
  6. India's growth in GDP or gross domestic product slowed to 6.6 per cent in the October-December period, its slowest pace recorded since the quarter ended September 2017.
  7. But some analysts say that given the weakening GDP (gross domestic production) growth and subdued inflation outlook, a larger reduction in the key rate is warranted.
  8. "Some market participants are anticipating a 50 basis points cut as well. But I believe that the RBI should focus only on addressing the liquidity situation in the economy, wherein the real problem lies," said Amar Ambani, president and head of research, Yes Securities.
  9. The country's debt markets appear to have priced in a 50 basis-point cut. Trading at 5.90 per cent, the one-year interest rate swap works out at 5.75 per cent on a daily basis, putting it 50 basis points below the current repo rate, news agency Reuters reported quoting rate derivative dealers.
  10. The stock markets were trading on a flat note with a negative bias ahead of the Reserve Bank of India's monetary policy decision. The equity markets snapped a four-day winning streak on Wednesday.

(With agency inputs)





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