India Central Bank Cuts Interest Rate “Pre-Emptively” For Second Time In 2 Months

In a surprise move, the RBI just cut its main interest rates for the second time in two months, taking it from 6.75% to 6.50%, in what the central bank calls a “pre-emptive” policy move, but what is in reality merely a confirmation that so far in 2015 at least 20 central banks have lowered their interest rate. 

From the statement: 

The RBI notes that the rupee has remained strong relative to peer countries. While an excessively strong rupee is undesirable, it too creates disinflationary impulses… 

…softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation. 

Via Bloomberg:

• INDIA’S RBI CUTS RATE TO 7.5%
• INDIA CUTS REVERSE REPURCHASE RATE TO 6.50% FROM 6.75%
• RBI KEEPS CASH RESERVE RATIO OF SCHEDULED BANKS UNCHANGED AT 4%
• INDIAN RUPEE ONE-MONTH FORWARDS EXTEND GAIN AS RBI CUTS RATE
• RAJAN SAYS FURTHER MONETARY ACTION TO DEPEND ON INCOME DATA
• RBI: DISINFLATION EVOLVING AT FASTER RATE THAN ENVISAGED

…and more from Reuters: 

Both rate cuts this year have took place outside of the central bank’s scheduled policy review meetings.

The rate cut marks a vote of faith in the government, which on Saturday pledged to be fiscally responsible but said it would take an additional year to meet a fiscal deficit target of 3 percent of gross domestic product.

Full statement from the RBI

Here is the full list of the 20 central rate cuts so far in 2015:

1. Jan. 1 UZBEKISTAN

Uzbekistan’s central bank cuts its refinancing rate to 9 percent from 10 percent.