Mumbai: The Indian central bank’s decision in March to slash interest rates in an unscheduled meeting was the biggest surprise since a Monetary Policy Committee was set up four years ago, according to a new research paper.
The panel’s move to cut the benchmark repurchase rate by 75 basis points caught the market unaware, wrote authors Aakriti Mathur from The Graduate Institute in Geneva and Rajeswari Sengupta of the Indira Gandhi Institute of Development Research in Mumbai. They assessed trends and reactions in overnight indexed swap rates.
“First, it was an unscheduled meeting, moved up from the originally planned early-April meeting,” Mathur said of the decision, which included the rate-cut as well as other easing measures in response to the pandemic, such as moratoriums on bank loan repayments. “All these three factors combined, implied a large, positive surprise for the financial markets.”
The panel’s decision to stand pat in December, when the market was expecting a rate cut, also qualifies as a big surprise, according to the paper.
India’s rate-setting panel is due to meet in the first week of August, having already cut the repo rate by 115 basis points so far this year as the economy heads toward its first annual contraction in more than four decades.-Bloomberg
Also read: Indian business outlook is the worst in the world, survey finds
Subscribe to our channels on YouTube & Telegram
Why news media is in crisis & How you can fix it
India needs free, fair, non-hyphenated and questioning journalism even more as it faces multiple crises.
But the news media is in a crisis of its own. There have been brutal layoffs and pay-cuts. The best of journalism is shrinking, yielding to crude prime-time spectacle.
ThePrint has the finest young reporters, columnists and editors working for it. Sustaining journalism of this quality needs smart and thinking people like you to pay for it. Whether you live in India or overseas, you can do it here.
