MW: India makes surprise rate cuts as economy slows
The Reserve Bank of India said Wednesday it is cutting two benchmark policy interest rates by half a percentage point each, making the surprise move following data last week showing a sharp slowdown in the Indian economy.
The latest cuts brought the repurchase rate -- the short-term borrowing rate for commercial banks -- down to 5.0% and the reverse repurchase rate -- at which the central bank borrows -- down to 3.5%.
Earlier data had shown India's economy grew by just 5.3% in the September-December quarter, compared to 7.6% in the previous quarter.
"India's growth trajectory has ... been impacted both by the financial crisis and the follow-on of global economic downturn. This impact has turned out to be deeper and wider than anticipated earlier," the RBI said in a statement announcing the rate moves.
The central bank also cited economic contraction in the U.S., Europe and Japan, saying the worse-than-expected fall in advanced economies has increased uncertainty for a global recovery.
It added that wholesale prices -- used in India as the benchmark gauge for inflation -- were declining, allowing more room for monetary easing.
However, it also said that "India's financial sector continues to be resilient in the face of global financial turmoil ... [and] continues to function in an orderly manner." Read Reserve Bank of India's policy full statement.
