25 bps rate reduction best possible option for RBI in next policy review: Report

THERE is merit and rationale for the RBI to reduce the key benchmark lending rate by 25 bps in the forthcoming monetary policy review, citing steeply fallen retail inflation that’s expected to remain benign even in the next financial year and the hardening of the bond yields since the June rate cut.

- ENS ECONOMIC BUREAU @ Mumbai

The RBI has already delivered 100 bps repo rate cuts in three installments between February and June when it surprised with an unconventional 50 bps repo cut. Since the monetary authority in June changed the policy stance to neutral, it spooked the bonds market. The RBI also hit a pause button in August, which further led to the rise in bond yields.