CB gives in, cuts policy rates

Says latest downward revision would signal to the market the need for further reductions in market interest rates and expansion in credit to the private sector

After facing some apparent criticism over its stand of not encouraging a more desired downward trend in interest rates, Central Bank last week reduced its policy rates
The Monetary Board, at its September 11 meeting decided to reduce its policy interest rates by 50 basis points each. Accordingly, the Repurchase rate and the Reverse Repurchase rate of the Central Bank would be 8.00 per cent and 10.50 per cent, respectively.
The Bottom Line in its August 19 issue highlighted that Interest rates, a major throttle to companies and key to spur a quicker recovery in the economy, weren’t declining but not fast enough.
In its August meeting the Monetary Board took a softer view and remained passive by not revising downwards its policy rates, a move which surprised financial and business circles.

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