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RBI Slashes Policy Rate In Anticipatory Move

In a surprise move, the RBI cuts rates for the second time in two months, in what the central bank calls a “pre-emptive” policy move. 

From the statement: 

The RBI notes that the rupee has remained strong relative to peer countries. While an excessively strong rupee is undesirable, it too creates disinflationary impulses… 


...softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation. 

Via Bloomberg:

*INDIA’S RBI CUTS RATE TO 7.5%

*INDIA CUTS REVERSE REPURCHASE RATE TO 6.50% FROM 6.75%

*RBI KEEPS CASH RESERVE RATIO OF SCHEDULED BANKS UNCHANGED AT 4%

*INDIAN RUPEE ONE-MONTH FORWARDS EXTEND GAIN AS RBI CUTS RATE

*RAJAN SAYS FURTHER MONETARY ACTION TO DEPEND ON INCOME DATA

*RBI: DISINFLATION EVOLVING AT FASTER RATE THAN ENVISAGED

 

...and more from Reuters: 

Both rate cuts this year have took place outside of the central bank's scheduled policy review meetings.


The rate cut marks a vote of faith in the government, which on Saturday pledged to be fiscally responsible but said it would take an additional year to meet a fiscal deficit target of 3 percent of gross domestic product.

Full statement