Mumbai: At its first bi-monthly monetary policy review of the fiscal slated for Thursday, the RBI is expected to cut its key lending rate by another 25 basis points (bps) in view of both low inflation and slowing industrial production.
At its final bi-monthly policy review of the last fiscal in February, the central bank's Monetary Policy Committee (MPC), presided over for the first time by bank Governor Shaktikanta Das, voted to lower its repo, or short-term lending rate for commercial banks, by 25 bps to 6.25 per cent. It was the first repo cut in one and a half years.
At the same time, the RBI changed its monetary policy stance from one of "calibrated tightening" to "neutral". While the MPC delivered a surprise repo rate cut in a 4-2 split vote, members unanimously agreed to the change in policy stance.
In terms of inflation, both retail and wholesale prices have shown a declining trend on a year-on-year basis.
Besides, there has been a sharp decline in manufacturing output, which slowed industrial production in January to 1.7 per cent.
“Low inflation has opened up room for the Reserve Bank of India to adopt a more accommodative stance to support faltering growth. The real question is how deep or shallow this rate cut cycle is going to be,” an HDFC report said. (IANS)
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