Central Bank's 25 BPS Rate Cut Leaves Market Disappointed

FY20 GDP forecast revised down to 6.1% from 6.9% due to slowing growth

The Reserve Bank of India (RBI) delivered another rate cut on Friday — the fifth in as many policy review meetings to boost a slowing economy. However, it failed to cheer the market, which was betting on a bigger rate reduction.

The six-member monetary policy committee (MPC) decided to cut interest rates by 25 basis points (bps) to 5.1%, with five members voting in favor of the quantum and R.H. Dholakia for a 40 bps cut (100 bps = 1 percentage point). “The MPC also decided to continue with an accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target,” the RBI said.

The central bank also revised its growth forecast for the current financial sharply, from 6.9% projected in the August policy, to 6.1%. Growth forecast for the first quarter of the next financial year was also trimmed to