Repo Rate

Why is it in the news?
  • The Reserve Bank of India (RBI) cut the benchmark repo rate by 25 basis points (bps) for the third time in a row.
  • RBI changed its policy stance to “accommodative" from “neutral" in an attempt to revive growth in Asia’s third-largest economy that has expanded at the slowest pace in five years.
More in the news
    • Possible causes behind rate cut:
      (1) The MPC notes that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy.
      (2) Gross fixed capital formation slumped to single digit growth.
      (3) Private consumption growth moderated in last two quarters of FY2019.
      (4) Export growth remained weak on intensifying trade war.
    • The RBI has revised GDP growth projection for the current financial year from 7.2% to 7%.
    • RBI targets 4% CPI inflation over the medium term.
    • In addition, a committee has also been formed to review the charges in transactions in automated teller machines.
    • The rate cut could lead to reduced EMIs on housing, vehicle and personal loans if banks decide to pass on the benefit.
Source
The Hindu.
 
 
 
 
Posted by Jawwad Kazi on 7th Jun 2019
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