Repo gets a Goldilocks cut

Central bank cites India’s robust economic growth and benign inflation to go for a 25 basis points repo cut

- Shayan Ghosh

The Reserve Bank of India (RBI) on Friday cut the repo rate by 25 basis points (bps) to 5.25%, citing a “rare Goldilocks period” where growth remains robust and inflation benign, surprising a section of the market that was expecting a pause.

Governor Sanjay Malhotra said that since the October policy, the local economy has witnessed rapid disinflation, and for the first time since the adoption of the inflation targeting framework, average headline inflation for a quarter breached the lower tolerance threshold of 2%. Average inflation measured by the consumer price index (CPI) was at 1.7% in the three months through September, against 0.3% in October.