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India Cuts Interest Rates
India's central bank has reduced its benchmark interest rate to 7.75% from 8%, effective immediately.
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India's central bank has reduced its benchmark interest rate to 7.75% from 8%, effective immediately.
The Reserve Bank of India has charged the higher rate on overnight lending for the past 12 months. Economists expected a reduction eventually but were surprised by the timing. The bank says the reduction is in part a response to a sharper-than-expected dip in the price of crude oil, commodities and fruit and vegetables.
There were other factors. BBC News notes that India's wholesale price index for December rose only 0.1%, one-sixth the expected increase. The consumer price index grew 5% compared with the 6% rate targeted by the bank.
Analysts predict several more rate reductions to help spur India's economy. They anticipate the lending rate will fall to 7% sometime this year.
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