RBI slashes key repo rate by 75bps to 4.40% to fight coronavirus impact

The Reserve Bank of India (RBI), the Indian central bank, in its emergency 3-day monetary policy meeting concluding on Friday, announced a 75bps Repo rate cut to 4.40%, in an effort to mitigate the economic fallout from the coronavirus pandemic.

Key comments by Governor Shaktikanta Das

Monetary policy committee (MPC) members voted in 4-2 in favor of cutting rates by 75 bps.

MPC cuts reverse repo rate by 90 bps.

Hope to mitigate effects of the virus, revive growth, preserve financial stability.

Monitoring markets and calibrating its operations as may be warranted.

Global slowdown could deepen if covid-19 prolongs and impact growth in India.

Prints of January, February indicate that inflation is running higher than our projections.

Aggregate demand may weaken and ease inflation further due to COVID-19.

War effort has to be mounted to combat the virus involving conventional and unconventional measures.

Outlook is very uncertain, MPC has refrained from giving any projections on growth, inflation.

Need to do whatever is necessary to shield domestic economy from the pandemic.

To unleash array of instruments from arsenal.

To cut Cash Reserve Ration (CRR) by 100bps to 3% for all banks.

To conduct auctions of targeted LTRO for up to 1tln rupees.

This comes a day after the Indian Finance Minister Nirmala Sitharaman announced a relief package for the poor and migrant workers in the country in light of the 21-day lockdown in the country to tackle the challenge posed by the coronavirus (Covid-19) pandemic.

USD/INR reaction

The rupee extended its recent bullish momentum and spiked to a new six-day high of 74.46 against the US dollar, in a knee-jerk reaction to the big rate cut announcement. USD/INR, currently, trades at 74.67, still down 0.30% on a daily basis.

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