Statsguru: RBI cuts inflation forecast, repo rate by 25 bps to 6.25%

RBI now expects inflation at 2.8 per cent in Q4FY19 and 3.2-3.4 per cent in H1FY20

In its meeting last week, the Monetary Policy Committee (MPC) surprised analysts by voting to cut the benchmark repo rate by 25 basis points (bps). As seen in Chart 1, the repo rate now stands at 6.25 per cent. 

With inflation continuing to surprise on the downside (Chart 2), the MPC also lowered its inflation forecasts. As against its earlier projection of inflation to range between 2.7-3.2 per cent in H2FY19 and 3.8-4.2 per cent in H1FY20, it now expects inflation at 2.8 per cent in Q4FY19 and 3.2-3.4 per cent in H1FY20. 

But, even as food prices continue