RBI governor Shaktikanta Das (Bloomberg file)
RBI governor Shaktikanta Das (Bloomberg file)

Rate cut of 35 bps balanced, based on data: Shaktikanta Das

  • A 0.25 percentage point reduction would have been 'inadequate', while a 0.50 percentage points cut would have been 'excessive'
  • 'Too much should not be read into it, it is a judgement call which the MPC has taken'

Reserve Bank of India governor Shaktikanta Das on Wednesday termed the steeper 0.35 percentage point reduction in the repo rate as a "balanced" call, given the domestic and global developments.

He explained that a 0.25 percentage point reduction, as it has done thrice this year since February, would have been "inadequate", while a 0.50 percentage points cut would have been "excessive".

The six-member Monetary Policy Committee (MPC) for the fourth consecutive times in a 4:2 vote resolved to cut the repo rate by 0.35 percentage points, taking the total reduction to 1.10% in 2019, to a near-record low of 5.40%.

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Das said the RBI has been pre-emptive in its actions on rates and the policy stance through the year, and has always provided adequate liquidity to the system.

Addressing the media at the customary post-policy presser, Das said there was nothing sacred about multiples of 0.25 percentage point cuts, and also made it clear that the decision has not been taken on "gut feel" but on hard data.

"Too much should not be read into it, it is a judgement call which the MPC has taken," he said, adding, it was "prudent" to be accommodative.

The RBI will ensure that there is sufficient liquidity available for the economy.

Expressing satisfaction on the transmission process by saying that financial markets have fully absorbed the benefits of the three past rate cuts, Das expressed confidence that there will be more rate cuts in the future by banks.

Das said the decision of the MPC is its "own autonomous, independent decision." To a question on real interest rates and the level which the central bank is targeting, he said this is not the right time to look at that aspect as the RBI's main focus is to meet the output gap.

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This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed

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