RBI cuts interest rate by 35 bps, 4th in row

The Reserve Bank on Wednesday cut key interest rate for the fourth consecutive time, as it reduces repo rate by 35 basis points to 5.40 percent to boost the slowing economy. The six-member monetary policy committee (MPC) also maintained the accommodative stance on the monetary policy.

Noting that inflation is currently projected to remain within the target over a 12-month ahead horizon, the MPC said since the last (June) policy, domestic economic activity continues to be weak, with the global slowdown and escalating trade tensions posing downside risks. It said that even as the past rate cuts are being gradually transmitted to the real economy, the benign inflation outlook provides headroom for policy action to close the negative output gap.

This is the fourth consecutive time that the RBI has reduced repo rate. In the earlier three policies, it has reduced repo rate by 25 basis points each. The RBI also revised real GDP growth for 2019-20 downwards to 6.9 percent from 7 percent in the June policy. CPI inflation is projected at 3.1 per cent for the second quarter of FY20 and 3.5-3.7 per cent for second half of FY20, with risks evenly balanced.

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