Three reasons why RBI governor cut repo rate by 25 bps.

Q: A move in Repo Rate cut that brought huge cheer to the markets.

Diwakar Shetty,

16th January 2015

Real estate News in Ahmedabad

inflation

rbi

rbi repo rates

repo rate cut

central bank

rbi governor raghuram rajan

fiscal deficit

consumer price index

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The 5th bi-monthly monetary policy statement also stated that once the monetary policy pattern shifts, following policy actions will be consistent with this pattern. Key to further relief are data that confirm continuing reduction in the rate of inflation pressures.

lekshmi.sanjeev@ymail.com, Delhi

17th January 2015

Comment

If the current inflation momentum and changes in inflation expectations continue, and fiscal developments are encouraging, a change in the monetary policy pattern is likely early next year, including outside the policy review cycle.

Ravindra Singh,

16th January 2015

Comment

Third and the most important aspect was households' inflation expectations have conditioned, and both short-term and longer-term inflation expectations have relieved to single digits for the first time since September 2009. Inflation results have fallen significantly below the 8% targeted by January 2015. On current policy settings, inflation is likely to be below 6% by January 2016.

Lekshmi,

16th January 2015

Comment

Yes Lekshmi,
Rajan has also accepted the government's promise of sticking to its fiscal deficit target of 4.1% in the current fiscal year. And recently the Finance Ministry had said that all efforts were being made to make sure that the government does not default on the fiscal deficit target.

Ravindra Singh,

16th January 2015

Comment

As per RBI Governor's statement, since July 2014, inflationary pressures (measured by changes in the consumer price index) have been reliefing. The path of inflation, while below the expected route, has been consistent with the assessment of the balance of risks in the Reserve Bank's bi-monthly monetary policy statements. Crude prices are expected to remain low over the year.

Lekshmi,

16th January 2015

Comment

Reserve Bank of India on Thursday (15.01.2015) cut the reverse repo rate by 25 bps to 7.75%. The central bank kept the Cash Reserve Ratio (CRR) unchanged at 4.0%. Referring relief inflationary pressures, RBI Governor Raghuram Rajan listed out several domestic factors for the sudden rate cut decision. These factors have significantly reduced the momentum of inflation, filling for the widely expected ending of favourable base effects.

Ravindra Singh,

16th January 2015

Comment