RBI reduces repo rate by 0.25% to 6.25%

In its Sixth Bi-monthly Monetary Policy Statement, 2018-19, the MPC also decided to change the monetary policy stance from calibrated tightening to neutral.

“These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” the statement said.

On the basis of an assessment of the current and evolving macroeconomic situation, the MPC noted that the output gap has opened up modestly as actual output has inched lower than potential. “Investment activity is recovering but supported mainly by public spending on infrastructure. The need is to strengthen private investment activity and buttress private consumption.”

Welcoming the RBI decision to cut repo rate, Tiruppur Exporters’ Association (TEA) president Raja M Shanmugham said, “The MPC decision to change the monetary policy stance from calibrated tightening to neutral gives confidence that there would not be any interest hike in the near future.”

“By taking into account this decision, all banks will come forward to pass on the reduction of interest rate to the borrowing units, which is desperately required for the knitwear garment exporting units, particularly to MSME exporting units which are suffering further to macroeconomic changes,” said Shanmugham. “The reduction of interest rate will pave way for the growth of investment and exports.” (RKS)

ALCHEMPro News Desk – India