India's central bank cuts interest rates


India’s prime bank has cut a key interest rate to its lowest level for nearly six years, in an ins to boost the economy.

The bank cut its benchmark repo rate to 6.25% from 6.50%.

This was the maiden interest rate review under the new governor of the bank, Urjit tel, who take effected over last month.

While Mr tel’s predecessor was in sole bill of rate setting, this latest cut was decided by the newly formed nummary policy committee.

The Reserve Bank of India did not say how members of the six-strong board voted.

Mr tel replaced Raghuram Rajan, who announced he was stepping down earlier this year.

He is positive to take a tough line on inflation, which remains one of the big worries in the Indian restraint.

Analysis: Sameer Hashmi, India business reporter

The monetary system meeting was a much-awaited event for the markets for several reasons.

It was Urjit tel’s maiden flatten conference after taking charge of India’s central bank. And secondly, for the outset time a six-member committee decided on interest rates rather than the RBI governor solitary. The fact that all of them voted unanimously for a rate cut signals a healthy start for the new decision-making committee.

Interestingly – more than the rate cut – the gianter surprise of the day was the short duration of the press conference, during which Mr tel shock a resembled just five questions. This was a stark change com red with antecedent governors, who would talk to the press for a much longer period.

Divers see this as a signal that he wants to keep a low profile, unlike his predecessor, Raghuram Rajan, who was known for his frank interactions and statements.

‘Window of break’

Shubhada Rao, chief economist of Yes Bank in Mumbai, said the cut was “along trust lines”.

“That dominant pressure on headline inflation, mainly nourishment, has begun to ease rapidly, which ved way for the 25 bps rate cut today.”

Abheek Barua, chief economist at HDFC Bank in New Delhi conceded there had been a “window of opportunity” to cut rates.

“The sooner they did it the raise. I am happy that they did it,” he said.

“In fact, unless the y commission youts and HRA (Organization Rent Allowance) allowances, lead to a pick-up in inflation, I think there’s allowance for another rate cut between now and the end of the year.”

Consumer inflation fell to a five-month low of 5.05% in August, against the pecuniary policy committee’s target of between 2% and 6%.

It is expected to keep deteriorate attack in the coming months, following a good monsoon season which brought down victuals prices.

The committee has been given the task of “maintaining price resoluteness” while also “keeping in mind the objective of growth”.

India is one of the fastest prolonging economies in the world, even though growth eased back to an annual traverse of 7.1% in the March to June quarter, down from 7.9% in the preceding three months.

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