RBI MPC starts deliberations on monetary policy amid high expectations of rate cut

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Mumbai | Updated: December 3, 2019 6:40:01 PM

If the Reserve Bank of India (RBI) cuts the repo rate on Thursday, it would be the sixth reduction in the short-term lending rate in 2019.

RBI interest rate, Macroeconomic data, RBI interest rate, Hong Kong, US , china, RBI policy, auto salesIn five reductions in 2019 so far, the repo rate has been lowered by a total of 135 basis points over concerns that growth momentum is slowing down and also to try to boost liquidity in the financial system.

RBI Governor Shaktikanta Das-headed Monetary Policy Committee (MPC) on Tuesday started its three-day deliberations on the policy review amid high expectations of another round of reduction in the key policy rate to revive the sagging economy. If the Reserve Bank of India (RBI) cuts the repo rate on Thursday, it would be the sixth reduction in the short-term lending rate in 2019. “The MPC will meet during December 3 to 5, 2019 for the fifth bi-monthly Monetary Policy Statement for 2019-20,” a release by the central bank said. The resolution of the MPC will be placed on the website of the RBI at 11.45 AM on December 5.

In five reductions in 2019 so far, the repo rate has been lowered by a total of 135 basis points over concerns that growth momentum is slowing down and also to try to boost liquidity in the financial system. The GDP growth slowed sharply to more than six-year low of 4.5 per cent in the July-September, hit by a slump in manufacturing output, which contracted by 1.0 per cent. The pace of GDP growth moderated from 5 per cent in April-June and 7 per cent in the July-September quarter of 2018.

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The RBI may cut interest rates again to support growth, bankers and experts said. The fall in GDP growth rate was despite a slew of new fiscal policy measures, including a large reduction in the base corporate tax rate in a bid to boost private sector investment.

The RBI governor had previously stated that interest rates will be cut until growth revives and this gives confidence that policy rates may be reduced at the end of three-day monetary policy review, a banker, wishing not to be identified, said. RBI has cut interest rates on every single occasion the multi-member monetary policy committee has met since Shaktikanta Das took over as the Governor of RBI in last December.

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