RBI cuts repo rate by bigger-than-expected 50 basis points

RBI cuts repo rate by bigger-than-expected 50 basis points
Highlights

Reserve Bank of India cut interest rates by 50 basis points on Tuesday in a bid to boost stuttering growth, with inflation well below its target level.

Reserve Bank of India cut interest rates by 50 basis points on Tuesday in a bid to boost stuttering growth, with inflation well below its target level.

The Reserve Bank of India (RBI) lowered the benchmark repo rate -- the level at which it lends to commercial banks -- to 6.75 percent, a larger cut than analysts had expected.

A Reuters poll last week showed 45 of 51 economists expect the RBI to cut the repo rate by 25 basis points to 7%, its lowest since May 2011. The RBI has already eased the policy rate by 75 bps so far this year.
The economy expanded at a slower-than-expected annualised rate of 7% in the April-June quarter. That is faster than China, but well below the government’s target of 8 to 8.5% for the year ending in March.

Rajan this month pointed out that without a favourable base effect, August inflation would have been around “mid five percent.”
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