RBI cuts key interest rate by 25 pc, changes strategy position to 'neutral'

Mumbai, Feb 7 The Reserve Bank of India Thursday cut benchmark interest rate by 0.25 percent to 6.25 percent on desire for swelling remaining inside its objective range, a move that may convert into lower monthly installments for home and other loans.

The central bank also changed its monetary strategy position to 'neutral' from the prior 'calibrated tightening', signalling further mellowing on its approach towards interest rates.

In the first policy review audit under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut, while the choice to change strategy position was unanimous.

The RBI cut its estimates on headline inflation which cooled off to a 18-month low of 2.2 percent in December for the next year, and expects the number to come at 2.8 percent in March quarter, 3.2-3.4 percent in first 50% of next monetary and 3.9 percent in second from last quarter of FY20.

Benchmark interest rate was cut by 0.25 percent to 6.25 percent, a move that would result in lower cost of borrowing for the banks that are relied upon to transmit the same to people and corporates.

"Feature expansion is anticipated to stay delicate in the close term, mirroring the present low dimension of swelling and the kind nourishment expansion viewpoint, the MPC goals stated, including "we should be careful of vegetable costs, oil costs, trade tensions, health and education inflation, financial market volatility and monsoon outcomes".

The rate cut is in consonance of accomplishing the medium term target of keeping up swelling at the 4 percent dimension while supporting development, it said.

Deputy Governor Viral Acharya and another MPC member, Chetan Ghate, voted in favor of the norm in interest rates, while Das and three others voted in favor of a cut in interest rates.