Policy adjustment: RBI rate cut prudent move in face of global uncertainty

Although uncertainties in the global economy have increased significantly because of a sharp increase in tariffs by the United States, the decision for MPC this week was fairly straightforward

In a world with heightened uncertainties, the six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) did well not to increase them further. As widely expected by the financial markets, the MPC on Wednesday unanimously decided to cut the policy repo rate by 25 basis points to 6 per cent. It also decided to change the policy stance from “neutral” to “accommodative”, which effectively means, barring an economic shock, the possibility of increasing the policy repo rate is off the table. The MPC in its upcoming meetings will only deliberate the possibility of cutting the policy rate