RBI Policy: Repo rate cuts by 25 basis points

The Monetary Policy Committee (MPC) on Thursday, 7 February, cut repo rate for the first time in 18 months and also unanimously changed its stance from “calibrated tightening” to “neutral”.

Amid expectations that the panel will soften its view on inflation risks in the economy, the committee cut repo rate by 25 basis points to 6.25 percent. This is the first rate cut announced by the MPC since August 2017.

The committee voted 4:2 to pare the repo rate by 25 basis points to 6.25 percent. MPC members Viral Acharya and Chetan Ghate voted against a rate cut.

This was the first policy of RBI Governor Shaktikanta Das, who heads the MPC.

“Several factors will shape the inflation path, going forward. First, food inflation has continued to surprise on the downside with continuing deflation across several items and a significant moderation in inflation in cereals. Several food groups are experiencing excess supply conditions domestically as well as internationally,” RBI said in a statement.

RBI said the short-term outlook for food inflation appears particularly benign, despite adverse base effects.