RBI cuts repo rate to 6.25% for the first time in nearly five years to support growth amid cooling inflation. Markets react mildly as economists foresee further easing ahead.
The Reserve Bank of India (RBI) reduced its key repo rate by 25 basis points to 6.25% on Friday, February 7, marking the first interest rate cut in nearly five years. This move comes as part of a broader effort to support India’s sluggish economy amid cooling inflation.
The rate cut is the first since May 2020, when the pandemic prompted aggressive monetary easing. Since then, the RBI focused on controlling inflation, which had remained above the 4% target for much of the period.
Following the announcement, India’s stock markets reacted with mild declines, with the Nifty 50 index dropping 0.5%. The yield on 10-year government bonds rose to 6.7%, and the rupee weakened slightly against the dollar.
The RBI’s updated forecasts project a real GDP growth of 6.7% for the next fiscal year, with inflation expected at 4.2%. For the current fiscal year, the RBI downgraded growth expectations to 6.4%, its weakest forecast in four years, from 6.6%. Inflation is projected at 4.8% for the fiscal year ending in March.
Although the MPC maintained a “neutral” policy stance, contrary to some predictions of a shift to "accommodative," further rate cuts could be on the horizon, according to economists like Shilan Shah from Capital Economics. He forecasts a total of 75 basis points in cuts during this cycle, given the soft patch expected in the economy over the next few quarters.
The RBI’s decision marks a key pivot in India’s monetary policy, as the central bank seeks to foster economic recovery in a challenging global environment.
Start your day informed with AnewZ Morning Brief: here are the top news stories for February 8th, covering the latest developments you need to know.
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Start your day informed with AnewZ Morning Brief: here are the top news stories for February 8th, covering the latest developments you need to know.
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A plane that vanished off radar 24 hours ago has been discovered amidst sea ice in Norton Sound, confirming the tragic loss of all 10 passengers and crew aboard.
Start your day informed with AnewZ Morning Brief: here are the top news stories for February 8th, covering the latest developments you need to know.
Britain’s most prolific rapist, Reynhard Sinaga, assaulted 48 men in the space of two years and he could be sent back to Indonesia.
"Right in the middle of Europe, Hungary is proud of its Asian cultural roots and its close and friendly relationship with Türkiye", says Kristof Szalay-Bobrovniczky
President Trump pledges to fire FBI agents whom he alleged are corrupt, and were part of the January 6th investigation.
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