India Makes Surprise Rate Cut, Citing Softening Inflation

MarketWatch Pulse

The Reserve Bank of India announced a surprise interest-rate cut Wednesday, trimming its policy repurchase rate by a quarter point to 7.5%. RBI Gov. Raghuram Rajan cited relatively benign inflation in making the move, saying in a statement that "softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6% in the second half." The cut followed a similar quarter-point reduction in January, also made outside the central bank's scheduled policy reviews. The RBI kept banks' required cash-reserve ratio unchanged. The decision took place just days after the government unveiled its budget Saturday, promising to make progress on balancing the nation's finances but also saying it could take a year longer than planned to reach a deficit target of 3% of the gross domestic product. The rupee seesawed after the move, with the dollar gyrating around the 61.77-rupee level, according to FactSet. The announcement came just ahead of the stock market open in Mumbai, but stocks opened higher after the news, with the BSE Sensex up 1.2%.

Copyright © 2015 MarketWatch, Inc.

Continue Reading Below