MUMBAI: India’s central bank cut its benchmark interest rate for a third straight time and paved the way for more policy easing to support an economy growing at the slowest pace since 2014.The repurchase rate was reduced by 25 basis points to 5.75%, the lowest in nine years, as predicted by 31 of 43 economists surveyed by Bloomberg News. “I wouldn’t be surprised to see a further one or two cuts in the next six months.”While Modi has limited headroom for fiscal stimulus, subdued inflation -- at 2.9% in April -- allowed monetary policy makers space to bolster the economy. Gross domestic product growth slowed to a five-year low of 5.8% in the three months to March.The RBI revised its inflation forecast for April-September to a range of 3-3.1%, up from 2.9-3% seen in April, citing a broad-based pickup in food prices. That’s still lower than the 4% medium-term inflation target of the central bank.“There’s a risk that spare capacity is still tight and a further few rate cuts could lead to a rebound in inflation and higher inflation in the long-term,” said Shah. “This looks like it will turn into a fairly aggressive easing cycle.” - Bloomberg

Source: The Star June 06, 2019 06:56 UTC