Announcing the monetary policy on Friday from Mumbai, Reserve Bank of India (RBI) Governor Sanjay Malhotra announced that the MPC has decided to reduce the policy repo rate under the Liquidity Adjustment Facility by 50 basis points to 5.5 per cent.
He said, “The reduction recommended by the MPC is for 50 basis points to 5.5 per cent. This is with an immediate effect.”
The RBI Governor also mentioned that the reason for the repo cut is that the inflation softened, near-term and medium-term alignment is within the RBI range, and food inflation remains soft.”
Consequently, the Standing Deposit Facility Rate, which is the SDF Rate, shall stand adjusted to 5.25 per cent, and the Marginal Standing Facility MSF Rate and the Bank Rate shall stand adjusted to 5.75 per cent.
Malhotra stated, “The Monetary Policy Committee met on the 4th, 5th, and 6th of June to deliberate and decide on the policy repo rate, and after a detailed assessment of the evolving macroeconomic and financial developments and the economic outlook ahead.”
The RBI Governor emphasised that the inflation outlook has been revised downwards this fiscal. The global backdrop remains fragile, and global growth is revised downwards by multilateral agencies. Growing economic and financial systems are reshaping the global economy.
The 55th meeting of the Monetary Policy Committee was held against the backdrop of an early and promising start to the monsoon season.
This is of vital significance for the Indian economy. In contrast, the global backdrop remains fragile and highly fluid. There is stability on all fronts in India’s growth, inflation, and domestic demand are improving. Indian eco provides an immense opportunity for investors.
According to the Ministry of Statistics and Programme Implementation, India’s retail inflation fell to 3.16 per cent in April, compared to 3.34 per cent in March.
The decline in inflation has brought it below the Reserve Bank’s comfort level of 4 per cent, leading to expectations that the central bank may take a softer stance on interest rates.
In the last MPC meeting held on April 7, 8, and 9, the RBI had already reduced the repo rate by 25 basis points, bringing it down from 6.25 per cent to 6 per cent.
