RBI Cuts Repo Rate To 7-Year Low Of 6%, Loans Could Get Cheaper

NEW DELHI: The monetary policy committee (MPC) of the Reserve Bank of India (RBI) today cut repo rate or its key lending rate by 25 basis points to 6 per cent, a seven-year low. On Wednesday, the RBI to cut its repo rate by a quarter percentage point to 6 per cent by Reuters 40 of 56 economists polled had expected. Banks are expected to lower their lending rates, making loans cheaper.

"MPC’s decision is consistent with a neutral stance of monetary policy 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 RBI said in a statement.


Below the RBI's mid-term target of 4 per cent for the past eight months, weak consumer spending as well as lower food prices have kept inflation. Consumer inflation eased to its slowest pace in more than five years to 1.5 per cent in June.

On inflation, the RBI said, "Prices of food and beverages, which went into deflation in May 2017 for the first time in the new CPI series, sank further in June as prices of pulses, vegetables, spices and eggs recorded year-on-year declines and inflation moderated across most other sub-groups. There are now visible signs, however, of the usual seasonal price spikes, even if with a delay and especially in respect of tomatoes, onions and milk."

The next meeting of the MPC is scheduled on October 3 and 4, 2017.

Dr. Chetan Ghate, Dr. Pami Dua, Dr. Viral V. Acharya and Dr. Urjit R. Patel were in favour of the monetary policy decision, while Dr. Ravindra H. Dholakia voted for a policy rate reduction of 50 basis points and Dr. Michael Debabrata Patra voted for status quo. The minutes of the MPC's meeting will be published by August 16.





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