New RBI governor Urjit Patel on October 4, 2016 announced the first rate cut in six months, ending the pause that had been in effect since April this year.
A six-member monetary policy committee (MPC), which has taken over the job of setting interest rates from the Reserve Bank of India, voted unanimously to bring down by a quarter of a percentage point the repo rate, or the rate at which the RBI lends to banks, to a six-year low of 6.25%.
Besides being the first policy decision of the MPC, this is also the first policy statement from the RBI after Patel took charge as governor. The announcement was a surprise since the expectation was that the central bank wopld hold rates until December. The monetary policy cofnmittee panel appears to have taken a deciSion to cut rates in anticipation of lower food prices.
The MPC maintained the projection of growth of real gross value added at 7.6% of FY17 and envisaged an inflation trajectory taking headline consumer price index up 5% by March 2017.
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