Interest Rate Cut by RBI to Boost Economy


Apr 17, 2012

The Reserve Bank of India (RBI) has reduced its key interest rates in order to boost the slowing economic growth.                                                                                            

The central bank announced a 50 basis points cut in its policy repo rate to 8 per cent but pointed out that there is very little possibility for any further reduction in the rates. The high prices of fuel and food have kept the RBI from reducing the rates due to concerns that a reduction in rate could reverse the fall in inflation. The growing fuel prices in the international market has resulted in continued pressure on inflation for the country, which is heavily dependent on imports for meetings its fuel requirements.

Economists and industry members want the central bank to cut rates to give a boost to the slowing economic growth. The inflation in the country started moderating in November after staying above 9 per cent for a year. The inflation had fallen to a 26-month low of 6.55 per cent in January

It had increased the rates 13 times since March 2010 in order to control the stubborn inflation in the country. The last cut in the repo rate was in April 2009.

For definition and Meaning of Policy Rates click here