The Reserve Bank of India on October 4 led by the newly-formed Monetary Policy Committee slashed the repo rate by 25 basis points.
With this, the repo rate which was earlier 6.50 per cent will now go down to 6.25 per cent. One hundred basis points is equal to 1 percentage point.
The rate cut comes exactly one month after Urjit Patel took over as the governor of the Reserve Bank of India after Raghuram Rajan left office on September 4.
The RBI in its press release said, “The decision of the MPC is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17.”
The central bank has set a varying inflation target of 2-6 per cent during 2017-21. Apart from that, a 4 per cent inflation target has been pegged for the upcoming financial years.
Since the morning today, the markets witnessed robust trading sessions on the news that the central bank may not go for a status quo and reduce its key policy rate. The benchmark S&P Sensex saw a rise of over 150 point in the early trade.