In his press conference today, RBI Governor Shaktikanta Das announced a cut in the repo rate by 40 basis points (bps) to 4 %. He also announced the extension of the moratorium on all term loans by another 3 months i.e. till August 31.
The RBI’s monetary policy committee, in an off-cycle meeting, voted 5-1 for a 40 bps repo rate cut, the Governor said. The reverse repo rate has been simultaneously reduced to 3.35 percent.
Commenting on the economic crisis due to Coronavirus, the Governor said, “Even though the lockdown may be lifted by end-May with some restrictions, economic activity even in Q2 may remain subdued due to social distancing measures and the temporary shortage of labor. Recovery in economic activity is expected to begin in Q3 and gain momentum in Q4 as supply lines are gradually restored to normalcy and demand gradually revives.”
Speaking about inflation, he said, “The inflation outlook is highly uncertain. As supply lines get restored in the coming months with gradual relaxations in the lockdown, the unusual spike in food inflation in April is expected to moderate. The forecast of normal monsoon also portends well for food inflation”.
The Governor added that the combination of fiscal, monetary, and administrative measures will create conditions that will enable a gradual economic revival going forward.
