Economy

India unexpectedly cuts key rate, changes stance to neutral

India unexpectedly cuts key rate, changes stance to neutral

In a sharp reversal from October, when the Reserve Bank of India took rate cuts off the table, Governor Shaktikanta Das - who took office in December - opened the door to more policy easing and brought growth back into the Monetary Policy Committee's focus. "The shift in stance from calibrated tightening to neutral provides flexibility to address, and the room to address, sustained growth of India's economy over the coming months as long as inflation remains benign".

With the US Federal Reserve signaling a pause in its rate-hike cycle, emerging markets from India to Indonesia are getting a breather as global risks mount. Central banks in the Philippines and Thailand also held rates steady this week. Most respondents had expected the central bank to only change the stance, to neutral from "calibrated tightening".

Bonds gained, and the rupee declined 0.2 per cent immediately after the rate move.

The cut is welcome news for Prime Minister Narendra Modi's government, which wants to boost lending and lift growth as it faces elections by May.

Owing to benign inflation numbers, the central bank changed its policy stance to neutral from calibrated tightening, adopted in October policy meet a year ago under the then RBI Governor Urjit Patel.

India's new RBI governor Shaktikanta Das "has delivered what the Modi government was hoping for", said Mark Williams, chief Asia economist of Capital Economics, in a note.

More news: Tusk says there's a special place in hell for Brexiteers

"Every monetary policy committee member can and should have an independent view", she said.

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) made a decision to reduce the key policy rate or the repo rate by 25 bps to 6.25% in the last bimonthly policy review of 2018-19 while changing the policy stance to "neutral" from "calibrated tightening". Last week it unveiled an expansionary budget, which included $13 billion of consumer stimulus ahead of an election.

Patel's exit prompted some to fret the RBI's independence was under threat, but some economists argued that Thursday's decision should not be read as a surrender to pressure.

Observing that actual inflation in the third quarter of 2018-19 was marginally lower than what was projected, the RBI said, "There have been downward revisions in inflation projections during the course of the year, reflecting mainly the unprecedented soft inflation recorded across food sub-groups". But core inflation - which strips out volatile food and fuel prices - has hovered around 6 percent due to elevated education and medical costs.

For April-September, the MPC lowered its projection on headline inflation to 3.2-3.4 percent from the 3.8-4.2 percent seen in December.


  • Trump documents subpoena branded hysteria by White House press chief

    Trump documents subpoena branded hysteria by White House press chief

    The subpoena appears to escalate SDNY's ongoing investigation into crimes committed by Trump's inauguration committee , said CNN . His real estate firm, Trump Organization, is also under scrutiny in the Southern District of NY , which issued Monday's subpoena.
    Eden Hazard Expected To Ask For Real Madrid Move

    Eden Hazard Expected To Ask For Real Madrid Move

    Football consultant Ian McGarry feels Hazard already has an agreement in place with the west London outfit to join the club. Ole Gunnar Solskjaer is said to be making a new centre-back his main priority before the end of the season.
    Spotify Significantly Expanded Its Podcasting Efforts With The Purchase Of Gimlet

    Spotify Significantly Expanded Its Podcasting Efforts With The Purchase Of Gimlet

    When it comes to streaming music, Spotify is the world leader thanks to its almost 100 million monthly paid subscribers. In Ek's blog today he stated that "This opportunity starts with the next phase of growth in audio - podcasting".
  • Oil prices edge higher amid concerns over global economy

    Oil prices edge higher amid concerns over global economy

    The sanctions aim to block US refiners from paying into PDVSA accounts controlled by Venezuelan President Nicolas Maduro . Technically, crude oil managed to violate a sideways trading range of $54.90 - $53.50 to place a fresh low near $53.10.
    Cricket Betting Tips and Match Prediction- New Zealand v India 1st T20

    Cricket Betting Tips and Match Prediction- New Zealand v India 1st T20

    MS Dhoni (39) and Krunal Pandya (20) arrested the slide with a 52-run partnership before the last three wickets fell for 10 runs. Faced with batting at 11 an over, India faltered from the start when Sharma went for one.
    Obesity-linked cancers on the rise in young adults

    Obesity-linked cancers on the rise in young adults

    For incidence rate ratios please see Tables S5 (12 obesity-related cancers) and S6 (18 additional cancers) in the appendix. Now, according to a latest study , obesity increases the risk of developing cancer in young adults.
  • Cleveland Cavaliers complete three way trade with Kings and Rockets

    Cleveland Cavaliers complete three way trade with Kings and Rockets

    Stauskas and Baldwin were acquired by the Cavs on Sunday in a trade with the Portland Trail Blazers for Rodney Hood . In Cleveland's fourth in-season trade, the team has now gathered two first-round and six second-round picks.
    Modern Family to End After Season 11

    Modern Family to End After Season 11

    Christopher Lloyd also told E!News that changes were made to the characters irrespective of whether it was the last season or not. Modern Family , which is now airing its 10th season on ABC , will end after its 11th season airing in 2019 to 2020.
    Jennifer Lawrence Is Getting Married, Her Rep Confirms!

    Jennifer Lawrence Is Getting Married, Her Rep Confirms!

    Jennifer Lawrence is now engaged to boyfriend Cooke Maroney , US publications reported today, February 6. The couple was reportedly spotted on romantic getaways and even indulged in some PDA in New York City.
  • Suns acquire Johnson, Ellington from Heat for Anderson

    Suns acquire Johnson, Ellington from Heat for Anderson

    Phoenix has the ability to swing another deal for Ellington but he can not be aggregated into a package deal. Johnson is set to earn $19.3 million this season, with a player-option for next year worth the same.
    UN says EU could win big in US-China trade war

    UN says EU could win big in US-China trade war

    Another worry is that more countries may join the fray and that protectionist policies could escalate to a global level. Brazilian companies that purchase soybeans , meanwhile, stand to lose out amid inevitable price hikes, it added.
    LeBron James Sits Apart From His Lakers Teammates

    LeBron James Sits Apart From His Lakers Teammates

    Lakers star LeBron James also addressed the chants postgame. "If you let that bother you, you are in the wrong sport". With James' return, the Lakers are looking to make significant additions for a late-season push.