{"id":149124,"date":"2019-06-06T10:00:26","date_gmt":"2019-06-06T14:00:26","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=149124"},"modified":"2019-06-06T08:35:30","modified_gmt":"2019-06-06T12:35:30","slug":"india-cuts-rate-3rd-time-in-2019-as-growth-seen-slowing","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/06\/india-cuts-rate-3rd-time-in-2019-as-growth-seen-slowing\/","title":{"rendered":"India cuts rate 3rd time in 2019 as growth seen slowing"},"content":{"rendered":"
June 6, 2019<\/div>
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By CentralBankNews.info<\/u><\/a><\/p>\n

India’s central bank cut its benchmark repo rate for the third time this year and changed its monetary policy stance to accommodative from neutral to boost demand, especially investment and private consumption, while inflation remains low enough to provide scope for looser policy.
\nThe Reserve Bank of India (RBI) lowered its repo rate by 25 basis points to 5.75 percent and has now cut it by 75 points this year after it switched from a tightening mode in February in response to the slowdown in global growth and weak inflation.
\n“A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern,” RBI said, adding inflation remains below its target even taking account the expected transmission of its previous two rate cuts.
\nThe rate cut was widely expected by investors after India’s gross domestic product grew only 5.8 percent in the first quarter of 2019, or the fourth quarter of fiscal 2018-19, the third quarter in a row of decelerating annual growth rate, as exports decelerated along with fixed capital formation.
\nRBI’s monetary policy committee was unanimous in today’s policy decision unlike in April when two of its four members had voted to maintain the rate.
\n“Global economic activity has been losing pace after a somewhat improved performance in Q1:2019, reflecting further slowdown in trade and manufacturing activity,” RBI said, adding:
\n“Weak global demand due to escalation in trade wars may further impact India’s exports and investment activity.”<\/p>\n

\u00a0 \u00a0 \u00a0 \u00a0RBI lowered its growth forecast for the current 2019-20 financial year, which began April 1, to 7.0 from April’s forecast of 7.2 percent, with risks to the forecast evenly balanced as the stock market remains buoyant and higher financial flows to the commercial sector augured well for investments.<\/div>\n
\u00a0 \u00a0 \u00a0 India’s headline inflation rate has been picking up in recent months after bottoming at 1.97 percent in January as food prices fell.<\/div>\n
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\u00a0 \u00a0 \u00a0In April overall inflation rose to 2.92 percent and food inflation also rose to 1.1 percent, the second consecutive month of an increase after 5 months of deflation.
\nHowever, inflation is still well below RBI’s 4.0 percent target, and consumer price inflation excluding food and fuel fell to 4.5 percent in April from 5.1 percent in March, the largest monthly decline since April 2017.
\nTaking into account past rate cuts and expectations of a normal monsoon, RBI forecast inflation of 3.0-3.1 percent for the first half of 2019-20, slightly up from April’s forecast of 2.9-3.0 percent.
\nFor the second half of 2019-20, RBI forecast inflation of 3.4-3.7 percent, slightly down from its previous forecast of 3.5-3.8 percent.
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The Reserve Bank of India’s second bi-monthly monetary policy statement for 2019-20:<\/p>\n

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“On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to:<\/div>\n