RBI Monetary Policy: RBI cuts repo rate by 0.25 percent to 6.25 percent

| Tuesday, October 4, 2016 - 16:16
First Published |
RBI, Urjit Patel, Monetary Policy Committee, Reserve Bank of India, RBI cuts repo rate, LAF
Mumbai: The newly-constituted Monetary Policy Committee (MPC) headed by the Reserve Bank of India (RBI) Governor Urjit Patel on Tuesday fixed the apex bank's key interest rates on Tuesday ahead of the RBI's first bi-monthly policy review under new governor.
Here are the amendments made in the policy: 
RBI cuts repo rate by 0.25% to 6.25%
Reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75%: RBI
MPC decision in line with aim of CPI at 5% by Jan-March
MSF bank rate adjusted to 6.75% from 7% earlier
RBI cuts repo rate by 25 basis points to 6.25% from 6.50%
The committee is headed by 6-member committee of which MPC has three members nominated by the Union government. If it is divided in its decision, the Governor can use his veto.
Meanwhile, experts said the MPC is unlikely to lower rates at its maiden review as it awaits more data on inflation.
"RBI may choose to wait for some more time before wielding the knife as inflationary trends may accelerate going forward," Indian rating agency Crisil said in a recent research note.
India's annual rate of inflation based on wholesale prices touched a 2-year high in August at 3.74% from 3.55% in the month before, official data showed in September.
After rising for the first time in April following 17 straight months of contraction, the WPI has cumulatively risen by 4.45% in the current fiscal up to August, as against 0.23% for the corresponding period in 2015.
Food articles inflation in August increased by 8.23% on year-on-year basis.
Earlier data on the consumer price index had showed that the annual retail inflation had eased by 100 basis points to 5.05% in August.
The government last week named three academics from the country's top institutions as its nominees. They are Chetan Ghate, Professor at the Indian Statistical Institute; Pami Dua, Director at Delhi School of Economics; and Ravindra Dholakia, Professor at the Indian Institute of Management, Ahmedabad.
The elevation of Patel has raised expectations among those who were critical of the then Governor Raghuram Rajan for not easing enough the monetary policy by cutting rates, though his moorings are as monetarist as his predecessor and he is considered to attach the same importance to inflation control.
His views on monetary policy were expressed at the time Rajan held rates in the February 2015 review after making an unexpected rate cut a month earlier -- the first in nearly two years -- as he elaborated on the "important backdrop" to the move, citing the trend of accommodative monetary policies being adopted by developed economies.
(With inputs from: IANS)
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