RBI lowers repo rate by 35 basis points to 5.40%

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  1. The Reserve Bank of India’s (RBI) monetary policy committee (MPC) has lowered its repo rate by 35 basis points to 5.4%.Repo stands for ‘Repurchasing Option’.It refers to the rate at which commercial banks borrow money from the RBI.
  2. RBI has also kept the door open for lowering rates further by retaining an accommodative policy stance.
  3. The RBI also revised its Gross Domestic Product(GDP) growth forecast for 2018-19 down to 6.9% from 7%.It has also flagged worries over weakening growth prospects due to sluggish consumption and low investment activity.
  4. The central bank has also noted that global economic activity has slowed down since the previous monetary policy meeting owing to trade tensions among leading economies.
  5. The committee has also projected the CPI inflation at 3.1% for the second quarter of the financial year 2019-20(FY20).CPI measures changes in the price level of a market basket of consumer goods and services purchased by households.
  6. RBI has adopted CPI as the key measure for determining inflation situation of Indian economy on the recommendation of Urjit Patel Committee.
  7. The Monetary Policy Committee(MPC) is a committee of the Reserve Bank of India.It is headed by its Governor which is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level i.e.inflation targeting.