India's Central Bank Lowers Interest Rate for First Time in Five Years
The Monetary Policy Committee of the Reserve Bank of India has unanimously voted to cut the interest rate by 25 basis points, marking the first reduction in nearly five years.
This was reported by Bloomberg.
Since December 2024, India has a new central bank governor, Sanjay Malhotra. Under his leadership, the regulator has decided to ease the country's monetary policy, the last change occurring in 2020.
This step was anticipated by most economists. Malhotra indicated that the less restrictive policy applies only to this meeting and is not necessarily indicative of future decisions.
The committee also decided to maintain a neutral monetary policy and focus on achieving inflation targets.
The central bank assured flexibility in providing liquidity. It has given banks more time to comply with the new liquidity coverage ratio.
Markets were disappointed by the unchanged monetary policy and the lack of new liquidity measures. The yield on 10-year bonds rose by 5 basis points to 6.71%. Stocks were volatile, with the NSE Nifty Index 50 dropping by 0.2%. The rupee strengthened against the dollar.
The central bank forecasts somewhat faster GDP growth and slower inflation in the financial year starting April 1.
Reminder:
India has removed import duties on certain components crucial for mobile phone manufacturing, encouraging local production.
