India cuts key interest rate to bolster economy

Sept 29, 2015 (LBO) – India’s central bank reduced its policy interest rates by a larger-than-expected amount to support the economy  amid China’s slowdown, media reports said.

The benchmark repurchase rate was cut to 6.75 percent from 7.25 percent with most analysts expecting only a quarter percentage point cut.

“The weakening of global activity since our last review suggests that commodity prices will remain contained for awhile,” Governor Raghuram Rajan said, ading that “monetary policy has to be accommodative to the extent possible” in current conditions.

“Investment is likely to respond more strongly if there is more certainty about the extent of monetary stimulus in the pipeline, even if transmission is slow,” he said.

The governor has faced pressure from the Indian government to reduce one of Asia’s highest borrowing costs. India will target keeping inflation within 6 percent by January, 5 percent a year later and near 4 percent by early 2018.