RBI CUTS REPO RATE BY 25 BPS, CHANGES POLICY STANCE TO ‘NEUTRAL’

The monetary policy committee of the Reserve Bank of India (RBI) cut the policy interest rate by 25 basis points to 6.25% in a 4-2 decision. The move could spur banks and non-banking finance companies into reducing their lending rates for consumer and home loans, resulting in lower EMIS for borrowers. In another key move, the central bank changed its stance to ‘neutral’ from the earlier ‘calibrated tightening’. The RBI policy is a very dovish one and signals further rate cuts. Inflation estimates have been revised very sharply lower by the central bank. The panel cut its estimates for inflation based on consumer prices for the first six months of the next financial year (AprilMarch) to 3.2%-3.4% from 3.8-4.2% earlier, a cut in estimates by as much as 60 basis points. The central bank also lowered its inflation projection for the entire year 2018-19 to 3.9%.