Rate cut shows RBI considering growth trends subdued: Moody’s

By: | Updated: September 29, 2015 8:39 PM

Rating agency Moody's today said RBI's decision to cut key interest rate by 0.50 per cent suggest that the central bank sees underlying growth trend as subdued...

Rating agency Moody's today said RBI's decision to cut key interest rate by 0.50 per cent suggest that the central bank sees underlying growth trend as subdued.Higher than the market expected rate cut suggests that the RBI sees underlying growth trends as subdued enough to require more aggressive stimulus, said Moody’s. (AP)

Rating agency Moody’s today said RBI’s decision to cut key interest rate by 0.50 per cent suggest that the central bank sees underlying growth trend as subdued enough to require more aggressive stimulus in the wake of rising external headwinds to growth.

“The 50 basis point cut in the repo rate was higher than the market expectation of 25 basis points. This suggests that the RBI sees underlying growth trends as subdued enough to require more aggressive stimulus, given the rising external headwinds to growth,” Moody’s Investors Service Associate Director Atsi Sheth said in a statement.

She further said it also suggests that RBI does not view inflation as a key risk at this point of time.

The rating agency said the economic impact of the cut will depend on the speed and extent to which it translates into lower borrowing costs for households and investors.

Another rating agency Ind-Ra said the rate cut by 0.50 per cent is in line with its expectations.

It said that the focus of RBI will be to work with the government to ensure that roadblocks to banks for better transmission of the bulk of the cumulative 125 basis point cut so far this year are removed.

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