India delivers rare interest rate cut to boost economy

Bloomberg

India’s central bank lowered its benchmark interest rate by an unconventional 35 basis points, its fourth reduction this year to support a slowing economy.
The repurchase rate was reduced to 5.4%, the lowest since 2010, surprising most of the 40 economists surveyed by Bloomberg who had predicted a quarter-point cut. AasthaGudwani, an economist at Bank of America Merrill Lynch in Mumbai, was the only analyst to correctly predict the move.
Governor Shaktikanta Das told reporters on Wednesday the Monetary Policy Committee viewed a quarter-point move as “inadequate.” A half-point reduction would have been “excessive” and 35 basis-point of easing was deemed “balanced,” he said.
The Reserve Bank of India has been the most aggressive in Asia in cutting interest rates this year to boost growth from a five-year low and spur investments. The Federal Reserve’s rate cut last week and escalating US-China trade tensions have given policy makers reason to provide more support to their economies.
Four of the six MPC members voted for a 35 basis-point cut, the RBI said. The monetary policy stance was left at accommodative.
Finance Minister NirmalaSitharaman had called for “significant” policy easing from the central bank to help revive growth.
The central bank cut the economy’s growth outlook again, expecting gross domestic product expansion for the year that began April 1 to ease to 6.9% from 7% forecast in June. It estimated inflation will remain benign at 3.1% in the fiscal second quarter, staying well under central bank’s 4% medium-term target for the rest of the year. India’s slowdown is cyclical and needs adequate measures by stakeholders to address the problem, the RBI governor said.
, while asking reporters not to read too much into the size of Wednesday’s move.
“There’s nothing sacred about multiples of 25,” Das said, referring to the conventional quarter-point moves. “It is a judgment call that the MPC has taken.”