RBI Cuts Repo Rate

Economy

RBI Cuts Repo Rate

Rate cut usually acts as a sentiment booster and aid companies that have to service large debts The Reserve Bank of India (RBI) slashed repo rate by 25 bps to 6% on April 4 as expected and kept the stance unchanged to ‘Neutral’. This is the second rate cut in 2019. “These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth,” the central bank said in a statement. The MPC notes that the output gap remains negative and the domestic economy is facing headwinds, especially on the global front. The need is to strengthen domestic growth impulses by spurring private investment which has remained sluggish. Rate cut usually acts as a sentiment booster and aids companies that have to service large debts. A cut by RBI injects liquidity in the economy. Loans with a low rate lead to an increase in buying interest in the consumer-driven economy which will help India Inc. to deliver strong earnings growth.