Reserve Bank of India Cuts Benchmark Rate for Second Time This Year
Central bank cuts its main repurchase rate by 0.25 percentage point
MUMBAI—India’s central bank surprised markets with an unscheduled cut to its key lending rate for the second time since the beginning of the year, indicating that it is joining a world-wide trend of monetary easing that is driving global interest rates to multiyear lows.
The Reserve Bank of India cut its main repurchase rate by 0.25 percentage point to 7.5%, according to a news release posted on its website. The bank said it acted following favorable inflation figures and because it was satisfied with some structural overhauls in the government’s budget, which was unveiled last week.
“Disinflation is evolving along the path set out by the Reserve Bank in January 2014 and, in fact, at a faster pace than earlier envisaged,” Gov. Raghuram Rajan said in a statement
Falling oil and commodity prices have helped lower India’s consumer-inflation rate to below 6% in recent months. If India’s inflation remains in check and the central bank continues to lower interest rates as expected, then India could see its gross domestic product growth climb further, economists predict.
Indian shares jumped to a new high after the rate cut, with the benchmark index rising to 30,024.74.