RBI Monetary Policy Committee cuts repo rate by 25 basis points to six per cent
Repo rate is the rate at which the RBI lends money to commercial banks.
The RBI in its release said that on the basis of an assessment of the current and evolving macroeconomic situation at its meeting on Wednesday, the Monetary Policy Committee (MPC) decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.25 per cent to 6.0 per cent with immediate effect.
It is expected that the rate cut will trigger hope of lower borrowing costs for households, and companies ahead of the festival season, according to media reports.
Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent.
The RBI said that the decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
The media quoted RBI Governor Urjit Patel as saying, "Inflation has fallen significantly last 3 months due to GST and good monsoon."
The market on Tuesday had anticipated the move and the benchmark indices had factored in the rate cut, experts said.
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