RBI cuts rates by 25 basis points: Live Updates
3 min read . Updated: 06 Jun 2019, 11:50 AM IST- RBI MPC cut the repo rate by 25 basis points to 5.75% with immediate effect
- RBI has also changed policy stance from neutral to accommodative
NEW DELHI: For the third time in a row, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) today cut interest rates by 25 basis points, as was widely believed.
At the end of a three-day MPC meeting, RBI Governor Shaktikanta Das announced its second bi-monthly monetary policy statement for 2019-20 today. The MPC also decided to change the stance of monetary policy from neutral to accommodative.
Amid slowing economic growth and rising global uncertainty, the RBI had decreased the short-term lending rate (repo rate) by 25 basis points each in its last two policy reviews.
Here are Live updates from RBI's monetary policy:
Consequently, the reverse repo rate under the LAF stands adjusted to 5.50 per cent, and the marginal
standing facility (MSF) rate and the Bank Rate to 6.0 per cent.
-RBI said these decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
-The benchmark equity indices Sensex and Nifty was trading negative since the beginning of the day as investors were cautious ahead of the RBI monetary policy. Sensex was down 150.69 points, or 0.38%, at 39,932.85 while the broader Nifty was trading at 11,955.30 falling 66.35%, or 0.55%.
-RBI's policy statement is followed shortly after by a press conference with the central bank governor and his deputies. The RBI also releases minutes of each meeting within two weeks of the event, disclosing how each member voted and why.
-The last time the RBI had to cut rates three times in a row was in 2013.
-At a forum in Washington in April, RBI Governor Shaktikanta Das had said that central banks could be more flexible in the size of rate adjustments, rather than sticking to the usual moves of 25 basis points.
-Goldman Sachs sees the RBI increasing interest rates next year - one hike of 25 basis points each in first quarter and second quarter of 2020.
-Even as the RBI has decreased the repo rate by 50 basis points to 6% since February, bank lending rates, on an average, have declined by only 5 basis points.
-Rating agency Icra expects the RBI to maintain a status quo in its monetary policy review. The agency said the central bank would adopt a wait and watch approach till the new finance minister Nirmala Sitharaman presents her first Budget on July 5.
-A recent report by SBI had advocated that RBI must go for a rate cut bigger than the widely-expected 25 basis points keeping in mind the current slowdown in the Indian economy.
-Most economists expect the RBI to cut repo rate by 25 basis points to 5.75%. Two-thirds of 66 economists polled by Reuters expect the MPC to wrap up on Thursday by cutting the repo rate by 25 basis points. Bloomberg said 31 of 43 economists it surveyed expect a 25 bps rate cut.
-At least three economists out of 43 surveyed by Bloomberg are penciling in a 50 basis points cut.
-Bank of America Merrill Lynch economist Indranil Sen Gupta, known for his contrarian calls in the past, is expecting that the RBI will lower its benchmark interest rate by 35 basis points.
-India Ratings has warned that rate cut is unlikely to stimulate demand in the near term due to the absence of quick resonance in the financial market.
-Apart from its likely rate cut, the RBI will have to tackle issues surrounding sluggish monetary policy transmission. Despite lowering rates by 50 basis points this year, bank lending costs have been rather sticky amid tighter liquidity. Those conditions, though, are showing nascent signs of easing.
-Kunal Kundu of Societe Generale SA is predicting a 50 basis-point reduction.
-Today's policy review will be RBI's first after the results of 2019 Lok Sabha elections.
-Uday Kotak, Managing Director of Kotak Mahindra Bank, opines that the RBI should reduce interest rates in view of the slowing economy. He however warned that the real challenge is to ensure transmission of the rate cut across deposit and lending rates.
-CII Director General Chandrajit Banerjee said the central bank needs to continue lowering interest rates in order to provide a stimulus to the economy.