India’s central bank cuts interest rate for fifth time

India’s central bank cut its key interest rate by a quarter of a percentage point yesterday to 5.15%, its fifth consecutive reduction.

That’s the lowest the benchmark rate the Reserve Bank of India charges on lending to commercial banks, its so-called “repo rate,” has been since March 2010.

The central bank also downgraded its economic growth forecast for the 201920 financial year to 6.1% from the 6.9% projected earlier.

The official policy stance remains “accommodative” Capital Economics said in a commentary.

“All of this suggests that further loosening will follow in the near term,” it said. It forecast another quarter percentage point cut in December.

Some on the central bank board wanted a larger rate cut, and share prices fell, with the benchmark Sensex losing 0.7% to 37,859.16.

In a bimonthly review of the economy the central bank said the reduction was needed to revive growth from a six-year low.

India’s first quarter GDP growth plunged to 5%, the slowest pace in six years, as consumer spending and corporate investment faltered. Declining industrial output and automobile sales suggest the slowdown could deepen.

The bank said yesterday that abundant rains in August and September have brightened the prospects for agriculture and indicate a revival of domestic demand.

The Reserve Bank is following the path of many other central banks, including the Federal Reserve, in loosening monetary policy by making credit cheaper in hopes of spurring more lending and business.