India’s central bank surprises with big rate cut

India’s central bank cut interest rates more than projected and unexpectedly reduced the cash reserve ratio for banks, providing a major liquidity boost to the economy as growth prospects dim and inflation subsides.

- ANUP ROY PRATEEK MAZUMDAR MUMBAI (BLOOMBERG)

The Reserve Bank of India’s six-member monetary policy committee, headed by Governor Sanjay Malhotra, voted five to one to lower the benchmark repurchase rate by 50 basis points to 5.5%, a move predicted by only one of the 34 economists surveyed by Bloomberg.

The central bank at the same time changed its monetary policy stance to “neutral” from accommodative, with the governor saying further action will depend on incoming data.

Yesterday's move comes as global economic conditions become less supportive, as US President Donald Trump's sweeping tariffs fuel trade tensions and disrupt supply chains. India’s economy slowed to 6.5% in the fiscal year that ended March, adding pressure on policymakers to spur growth.

Indian bonds swung in volatile trading, while stocks erased losses to trade 1% higher, with bank shares hitting arecord high. The rupee was steady.