INSUBCONTINENT EXCLUSIVE:
Mumbai: The Reserve Bank of India (RBI) cut the key interest rate by a quarter point for the second time this year as expected but kept
markets guessing with a noncommittal outlook on the future course of action despite lowering inflation and economic growth
forecasts.
Governor Shaktikanta Das signalled that liquidity measures may also be tempered given the record amount of bond purchases last
fiscal and the deployment of new dollar-rupee swap deals for $10 billion which have thus far ensured sufficient cash availability.
The
governor said there was room for more rate cuts with positive real interest rates of nearly 3 percentage points and a benign inflation
outlook, but was not more forthcoming ahead of an impending general election that raises the prospect of adverse fiscal implications down
per cent from 6.25 per cent
Other key rates moved in lockstep with this
downward revisions in the CPI (Consumer Price Index) trajectory and expectations of benign inflation as well as the downward revisions in
borrowing.
Bond yields jumped, with the benchmark 10-year yield rising as much as 14 basis points before closing at 7.35 per cent, eight
basis points higher than the previous close
Bond yields and prices move in opposite directions
The Sensex fell about half a percentage point to 38,684.72 and the rupee fell the most since December 3, more than 1 per cent, or 74 paise,
to 69.16 against the dollar
One basis point is one-hundredth of a percentage point.
The interest rate cut comes as global central banks are easing up on interest rates
and their stance on liquidity amid the threat of slowing economic growth
An ET survey of 26 market participants had estimated a quarter percentage point reduction.
The economic growth estimate for FY20 has been
lowered to 7.2 per cent from the 7.4 per cent projection made in the February policy
Retail inflation has been projected at 3.5-3.8 per cent in the second half of the current fiscal
In the first half, it may range from 2.9 per cent to 3 per cent.
The six-member MPC voted four to two in favour of a 25 basis point
reduction with deputy RBI governor Viral Acharya and independent member Chetan Ghate wanting to keep rates unchanged
On the stance, only Ravindra Dholakia voted for a change.
Consumer prices rose 2.57 per cent in February compared with 1.97 per cent in
