New Reserve Bank of India (RBI) governor Sanjay Malhotra on Friday, February 7, announced that the Monetary Policy Committee (MPC) has decided to cut the benchmark repo rate by 6.5%.
This was the first rate cut in nearly five years after it remained unchanged for 11 consecutive policy meetings.
Sanjay Malhotra also announced that the RBI estimates real GDP growth for the next year to be at about 6.75%. For the first quarter, it is estimated to be 6.7%, for the second quarter, the estimate is 7%, and it is 6.5% for both the third quarter and fourth quarter.
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How did the stock market react to the rate cut announcement?
The stock market plunged after the RBI’s rate cut announcement. At 10:35 am IST, the benchmark BSE Sensex was down 192.14 points or 0.25%, reaching 77,866.02, while the broader NSE Nifty was down 73.05 points or 0.31%, reaching 23,530.30.
What was previous RBI MPC decision?
The previous MPC decision, led by former RBI Governor Shatikanta Das was to keep the repo rate unchanged at 6.5%.
The decision was taken by a 4:2 majority, Das had said.
The MPC also decided to hold the Standing Deposit Facility (SDF) rate at 6.25% while the Marginal Standing Facility (MSF) and Bank Rate was retained at 6.75%.
Das also said the central bank’s Gross Domestic Product (GDP) growth projection for 2024-25 stood at 6.6%, which is down from the earlier estimate of 7.2%.
This was because of the less-than-expected GDP growth of 5.4% in the three months ended September, the slowest in seven quarters.
Meanwhile, the central bank also raised its retail inflation forecast to 4.8% for FY’25, from the earlier 4.5%. Additionally, it cut the Cash Reserve Ratio (CRR) to 4%, a reduction of 50 bps (basis points).
(This is a developing story. Stay tuned for updates)
