RBI bows to pressure, cuts repo rate by 50 bps to 6.75% - Moneylife

RBI bows to pressure, cuts repo rate by 50 bps to 6.75% - Moneylife

My VIEW:

Last week, while commenting(in a financial daily) on speculations about rate cut, I had expected a cut by 25 basis points and observed that

"That will satisfy the finance ministry with which Dr Rajan has to at least maintain the present comfort level for several reasons much beyond repo rates. By opting for such a stance, which will not have much impact on any of the economic indicators including inflation till end FY 2016, will also silence the other ‘school’ of economists for the time being. After all the impact of the earlier rate cuts aggregating 75 basis points is yet to percolate to the ground level."

The doubling of the cut puts RBI in a better position to make FM come round over certain long pending issues where RBI needs GOI help. Also the present stance of going more than half the way may put the central bank in a position to make banks listen about passing on the benefits of rate cut to borrowers.

M G Warrier

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