RBI cuts repo rate by 25 bps: 10 takeaways

Contrary to market expectations, the Reserve Bank of India (RBI) on Thursday, announced reduction in the repo rate by 25 basis points to 6.25% from the existing 6.5%. Here are the 10 key takeaways from the RBI's Monetary Policy Committee (MPC) outcome:

1. The RBI reduced the repo rate by 25 basis points to 6.25% from 6.5%, in alignment with the government's wishes.

2. Governor Shaktikanta Das votes in favour of the rate cut. Other members of MPC voted in favour of the rate cut are: Ravindra H. Dholakia, Pami Dua, Michael Debabrata Patra. Two other members such as Chetan Ghate and Viral V. Acharya voted to keep the policy rate unchanged.

3. The reverse repo rate also revised to 6% from existing 6.25%.

4. The MPC also decided to change the monetary policy stance from calibrated tightening to neutral.

5. The decision to change the monetary policy stance was unanimous.

6. The MPC decided to revise CPI inflation outlook downwards to 2.8% in Q4:2018-19, 3.2-3.4% in H1:2019-20 and 3.9% in Q3:2019-20.

7. Also changed the outlook of inflationary pressures from upward to central, despite the recent hike in the crude oil prices.

8. RBI commentary is benign on Budget 2019. Says "Several proposals in the union budget for 2019-20 are likely to boost aggregate demand by raising disposable incomes, but the full effect of some of the measures is likely to materialise over a period of time"

9. The MPC reiterated its commitment to achieving the medium-term target for headline inflation of 4% on a durable basis.

10. GDP growth for 2019-20 projections pegged at 7.4% – in the range of 7.2-7.4% in H1, and 7.5% in Q3 – with risks evenly balanced.

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