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India's Central Bank Cuts Key Rates By 50 Bps

India's central bank on Tuesday decided to reduce its key interest rates by a more-than-expected 50 basis points.

The Reserve Bank of India cut the repo rate to 8.00 percent from 8.50 percent with immediate effect. The repo rate is the rate at which central bank lends to banks. The reverse repo, the rate at which the central bank borrows from banks, was reduced to 7.00 percent from 7.50 percent. Economists were expecting a quarter point reduction.

The RBI said that the reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate which, in turn, is contributing to a moderation in core inflation.

At the same time, upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates, the bank added.

The cash reserve ratio, or CRR, was left unchanged at 4.75 percent as expected.

The baseline GDP growth for 2012-13 is projected at 7.3 per cent. At the same time, WPI inflation for March 2013 is placed at 6.5 percent.

by RTTNews Staff Writer

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