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India - Money

Reserve Bank of India cuts rates again in April

As widely expected by market analysts, the Reserve Bank of India’s Monetary Policy Committee (MPC) cut all monetary policy rates by 0.25 percentage points at its 2–3 April meeting, reducing the repo rate to 6.00%, the marginal standing facility to 6.25% and the reverse repurchase rate to 5.75%. This decision was supported by four of the six MPC members, with the remaining two members voting to keep rates unchanged. The MPC also voted by a majority to maintain the current monetary policy stance as “neutral”.

April’s monetary policy decision was heavily influenced by inflation considerations. In February, although consumer price inflation accelerated to 2.6% from 2.0% in January, it remained close to the lower bound of the MPC’s target range of 2.0% to 6.0%. Moreover, the MPC lowered its inflation forecast for April–September to 2.9%–3.0% from 3.2%–3.4%, and its forecast for October–March to 3.5%–3.8% from 3.9%. Anticipated weaker economic activity growth—reflected by the MPC cutting its GDP growth forecast for April 2019–March 2020 to 7.2%, down from 7.4%—is a key reason behind the more modest inflationary pressures that are expected in the coming months.

Analysts at Nomura said that April’s monetary policy decision was “broadly consistent with our macro view and expectations”, although they added they considered the RBI’s growth projections as “somewhat optimistic”. Reflecting on what this means for future monetary policy, Nomura analysts stated that “contained inflation amid disappointing growth should create some space for further policy easing”. The next monetary policy meeting is scheduled for 4–5 June.

Our complete range of Consensus Forecast panelists are currently updating their forecasts, and new Consensus Forecasts for interest rates will be available on 16 April.

India - Money Data

2013  2014  2015  2016  2017  
Money (annual variation in %)12.3  11.7  11.5  6.3  21.9  

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India Money Chart

India Money
Note: Annual variation of M2 in %.
Source: Reserve Bank of India and Met the why particular calculations.

India Facts

Bond Yield7.39-0.04 %May 13
Exchange Rate70.57-0.09 %May 13
Stock Market37,091-0.08 %May 13

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