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India Central Bank Cuts Interest Rate "Pre-Emptively" For Second Time In 2 Months

Tyler Durden's picture




 

In a surprise move, the RBI just cut its main interest rates for the second time in two months, taking it from 6.75% to 6.50%, in what the central bank calls a “pre-emptive” policy move, but what is in reality merely a confirmation that so far in 2015 at least 20 central banks have lowered their interest rate. 

From the statement: 

The RBI notes that the rupee has remained strong relative to peer countries. While an excessively strong rupee is undesirable, it too creates disinflationary impulses… 


...softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation. 

Via Bloomberg:

  • INDIA’S RBI CUTS RATE TO 7.5%
  • INDIA CUTS REVERSE REPURCHASE RATE TO 6.50% FROM 6.75%
  • RBI KEEPS CASH RESERVE RATIO OF SCHEDULED BANKS UNCHANGED AT 4%
  • INDIAN RUPEE ONE-MONTH FORWARDS EXTEND GAIN AS RBI CUTS RATE
  • RAJAN SAYS FURTHER MONETARY ACTION TO DEPEND ON INCOME DATA
  • RBI: DISINFLATION EVOLVING AT FASTER RATE THAN ENVISAGED

...and more from Reuters: 

Both rate cuts this year have took place outside of the central bank's scheduled policy review meetings.


The rate cut marks a vote of faith in the government, which on Saturday pledged to be fiscally responsible but said it would take an additional year to meet a fiscal deficit target of 3 percent of gross domestic product.

Full statement from the RBI

* * *

Here is the full list of the 20 central rate cuts so far in 2015:

 

1. Jan. 1 UZBEKISTAN

Uzbekistan's central bank cuts its refinancing rate to 9 percent from 10 percent.

2. Jan. 7/Feb. 4 ROMANIA

Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25 percent. Most analysts polled by Reuters had expected the latest cut.

3. Jan. 15 SWITZERLAND

The Swiss National Bank stuns markets by scrapping the franc's three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 EGYPT

Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

5. Jan. 16 PERU

Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

6. Jan. 20 TURKEY

Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

7. Jan. 21 CANADA

The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

8. Jan. 22 EUROPEAN CENTRAL BANK

The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September next year, and perhaps beyond.

9. Jan. 24 PAKISTAN

Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.

10. Jan. 28 SINGAPORE

The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has "shifted significantly" since its last review in October 2014.

11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.

12. Jan. 30 RUSSIA
Russia's central bank unexpectedly cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.

13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

15. Jan. 19/22/29/Feb. 5 DENMARK
The Danish central bank cuts interest rates a remarkable four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.

16. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds

17. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years

18. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.
The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.

19. February 23, ISRAEL

The Bank of Israel reduced its interest rate by 0.15 percentage points, to 0.10 percent in order to stimulate a return of the inflation rate to within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.

20. Jan. 15, March 3, INDIA

The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75 percent and signals it could lower them further, amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s. Then on March 3, it followed through on its promise and indeed cut rates one more time, this time to 7.50%

 

 

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Tue, 03/03/2015 - 23:45 | 5852677 sapioplex
sapioplex's picture

MOAR MUNEE! MOAR!!

Tue, 03/03/2015 - 23:48 | 5852689 johngaltfla
johngaltfla's picture

DEFLATION

is

MOAR

Bullish!

(until it's not)

Tue, 03/03/2015 - 23:51 | 5852697 LetThemEatRand
LetThemEatRand's picture

Someone must have pressed zero when they called "customer service" in India.

Tue, 03/03/2015 - 23:53 | 5852703 johngaltfla
johngaltfla's picture

My bad.

Wed, 03/04/2015 - 07:57 | 5853274 GetZeeGold
GetZeeGold's picture

 

 

No worries......in this environment.....you shoot first and ask questions later.

 

Threaten to raise rates Mr Yellen.....we're all standing around the flag pole double dog daring you.

Wed, 03/04/2015 - 07:59 | 5853280 Atomizer
Atomizer's picture

Press three for english

Tue, 03/03/2015 - 23:59 | 5852716 Stoploss
Stoploss's picture

It'll be 6% next week...

NIRP by June.

Wed, 03/04/2015 - 01:21 | 5852910 gimme-gimme-gimme
gimme-gimme-gimme's picture

How they can be doing rate cuts is beyond me. Just a year in a bit ago they were having a huge currency crises now these fuckers are cutting rates.

What a fucked up financial world this has turned into.

Wed, 03/04/2015 - 05:54 | 5853148 TheRideNeverEnds
TheRideNeverEnds's picture

A world where the USD is all that matters; /DX 120 by the end of this year.

Tue, 03/03/2015 - 23:45 | 5852681 kliguy38
kliguy38's picture

must be one helluva recovery this world is in for all these cuts after 6 years of growth and expansion

Wed, 03/04/2015 - 00:58 | 5852864 Four chan
Four chan's picture

well target just shit canned thousands. so theres that.

Wed, 03/04/2015 - 01:26 | 5852919 MrTouchdown
MrTouchdown's picture

It's the "Rate-Cut-Recovery". It's a special flavor.

Tue, 03/03/2015 - 23:49 | 5852692 joego1
joego1's picture

They have those old antique interest rates that could never exist again here in the land of the free home of the brave.

Wed, 03/04/2015 - 00:51 | 5852845 Buckaroo Banzai
Buckaroo Banzai's picture

Can you imagine getting 6.5% on your money??? It's like a weird crazy dream.

Wed, 03/04/2015 - 00:59 | 5852866 Four chan
Four chan's picture

lol you are reading my mind

Wed, 03/04/2015 - 04:23 | 5853079 ebworthen
ebworthen's picture

I know, right?

Why doesn't the "greatest country in the World" pay 6.5%?

Hmmm?  What's up Janet?  Reward the banks, punish savers seems to be the rule in U.S., eh?

Wed, 03/04/2015 - 00:33 | 5852707 Dubaibanker
Dubaibanker's picture

Me thinks Indian interest rate cuts are due to the FIRST EVER downgrades of 2 Govt owned banks to BB last night:

Moody's downgrades IOB, Central Bank's deposits 

India is doing so well that Volvo decided yesterday that they will exit India:

Volvo selling shares in India's Eicher Motors to raise up to $300 mln - term sheet

Just last night, China seized the massive London hotel and perhaps 2 in NY belonging to an Indian billionaire languishing in jail for last 1 year:

china seizes control of grosvenor hotel of sahara

Just yesterday, India arrested directors of 3 large stock broking firms:

Police arrest directors of 3 top broking firms in NSEL case 

Or did the rate cut happen because 6 days ago, RBS decided to shut down India and leave and lay off about 1,200 employees:

RBS to end operations in India, 24 other countries 

 Read more at: http://www.livemint.com/Companies/WQci47ddihsVbmGkdN5uEJ/RBS-to-shut-down-operations-in-India-24-other-countries.html?utm_source=copy

Or maybe because RBI heard that over 50,000 people have been laid off in the last 2 months by Yahoo, TCS, IBM, Wipro, Foxconn, Nokia, HCL etc....?

 Mass layoffs shake India’s IT industry

Or maybe RBI heard that eBay might be the next one to leave India because they laid off 350 employees?

eBay lays off 350 in India

 

Or is the RBI reacting to the terrible budget by India's - Good at Marketing/PR - PM who failed in his budget miserably with a D, at best.

Narendra Modi’s budget fails the Indian economy in so many ways

Or is it because RBI realised that perhaps for the first time ever, the Finance Minister of India lied in the Parliament when he said corporate taxes would reduce from 30% to 25% over the next 4 years but in fact increased the tax rate for the coming fiscal year. 

 Jaitley lowers corporate tax. Really?

Or was it because the hike in service tax by over 2% will impact consumption and drive down both sales and growth?

Budget 2015: Service tax hike likely to hit overall consumption

 

Or is it because the pro Hindu and non secular party ruling India is taking India backwards by banning beef in the city of Mumbai and state of Maharashtra yesterday and regressing India back by decades, after the previous Congress ruled Govt let the same bill hang in the air for over 19 years?

India's Maharashtra state bans beef
Wed, 03/04/2015 - 00:44 | 5852834 DavyRoySixPack
DavyRoySixPack's picture

Thank you for your informative post. 

Wed, 03/04/2015 - 03:11 | 5853026 Dubaibanker
Dubaibanker's picture

I wish to correct my statement. Indian banks were downgraded to BB level by S&P for the first time in Nov 2014 and Moody's is just catching up today. That is why the bonds are not moving downwards today.

Wed, 03/04/2015 - 00:56 | 5852858 Max Steel
Max Steel's picture

spot on bhai . 

Wed, 03/04/2015 - 05:48 | 5853142 sessinpo
sessinpo's picture

You are addressing the symptom, not the actua issue.

What caused the downgrades? Downgrades that will continue and won't be limited to India.

Wed, 03/04/2015 - 09:32 | 5853478 Dubaibanker
Dubaibanker's picture

It is a symptom, no doubt, and is a data point to consider.

Since this post is about India, hence the focus on India.

Downgrades are being caused because all Govts worldwide, except China, have run out of money. The financial jugglery, QE, bailouts, delay of Basel..blah blah blah can only delay the inevitable (kicking the can down the road?) only for so long.

The end game has begun!

Banks in Cyprus, Austria, Ukraine have going bust. While Dutch, British and Austrians have been nationalised. Russian, Brazilian and Indians can only be downgraded so far because they have still a few more years to go. American banks are quasi Govt with QE, bail outs and what not yet bonuses and profits remain privatised!

US banking system is the worst of its kind and behaving like termites now and making the entire economy decrepit from inside before it ultimately implodes/explodes, probably by next year (but must admit that the US banks have shed a lot of assets and shrunk mostly to within US itself so all damage will be within US if US debt were to go belly up). All banks are shedding assets and even uncle Warren is buying outside US, Chinese are not allowed to enter/buy (in the false name of national security while US wants enrty into China...hahaha...what a joke on fairness/equality). Alll this doesn't indicate a lot of strength.

Australia and Canada are so far so good and have also got a few years left. Middle East, Africa and China are well insulated from any collapse of the Western banking complex, Russia too as well as Latam.

Less said the better for Japanese banks. In the 1980's 9 out of 10 banks in Top 10 globally were Japanese. Today, all 9 combined are just 1 in the Top 10 called Mitubishi UFJ.

EU and US will be the only ones to collapse, because outside of these NATO commies, China is there to support everybody else. So bring out the popcorn and let the banking death games begin in the incestuos UK/EU/US orgy, like the world has not seen before!

Wed, 03/04/2015 - 00:02 | 5852727 pan
pan's picture

Race to the bottom bitchez.....

Wed, 03/04/2015 - 00:58 | 5852865 battlestargalactica
battlestargalactica's picture

What? No (sorta) good paying jobs? Sounds like India needs moar 'indians-in-waiting' just like The North American Union- I mean the U.S.! Get a couple hundred thousand Central and South American 'immigrants' to come in with no skills, all kinds of previously eradicated diseases, and felony rap sheets!

Come on, India! What? Are you rayciss?

Wed, 03/04/2015 - 01:09 | 5852882 Northern Lights
Northern Lights's picture

Wait till tomorrow morning, Wednesday Mar 4th.  The Bank of Canada is supposed to make an interest rate announcement tomorrow.  Most are speculating that BOC will reduce the over night lending rate another 0.25%.  The second such cut in 2 months.  CAD is gonna tank, hard.  Well on it's way to $0.60 per $1 USD.

Wed, 03/04/2015 - 04:54 | 5853099 AbbeBrel
AbbeBrel's picture

Yup looks like the Loonie is now 20% off over two years relative to the Buck - and the ZHollapse (declines in ZH are generally called Collapse, so I am going to start calling them ZHollapses) started BEFORE the implosion in oil prices.

And now the Calgarians are getting Crucified (source calgaryherald.com). Not much fun up there right now...

Wed, 03/04/2015 - 01:42 | 5852909 onmail
onmail's picture

More News :

Govt wants the People to deposit their Gold in banks  & only hold certificates

Hah ha ha

(So that govt can deposit ;-) that to American / European depositories )

What happened to 557  tonne of Gold with Govt , looky here:

http://www.zerohedge.com/news/2014-07-03/india%E2%80%99s-central-bank-se...

Looks like America has another puppet with this modus-operandi:

 Fund NGOs , They fund Political parties, they win elections, 

 Now America wants its returns (in Gold)

 You know what :

20000 tonnes (you read it right Twenty Thousand Tonnes of Gold) is with Indian people

America is looting all countries by changing govts 

Wed, 03/04/2015 - 10:05 | 5853614 Max Steel
Max Steel's picture

It's nothing like that onmail .

Wed, 03/04/2015 - 01:48 | 5852950 walküre
walküre's picture

As long as they can cut, they're in good shape. The PIIGS couldn't cut their rates and the market forced borrowing costs higher which prompted the bailouts and the IMF TROIKA clown show.

Wed, 03/04/2015 - 02:37 | 5852988 devo
devo's picture

Central Banks are going to start killing excess citizens soon. Rates can only go so low.

Wed, 03/04/2015 - 04:56 | 5853102 Burnbright
Burnbright's picture

You mean the cops aren't killing unarmed homeless people? 

Wed, 03/04/2015 - 05:51 | 5853144 sessinpo
sessinpo's picture

Government. Banks only enslave people. Government has the power to kill people. Banks only finance it on the backs of taxpayers

Wed, 03/04/2015 - 04:56 | 5853101 Which is worse ...
Which is worse - bankers or terrorists's picture

Once they finish cutting to NIRP there is always Indian QE. 

 

MOAR! MOAR! MOAR! MOAR! MOAR! MOAR! MOAR! 

Wed, 03/04/2015 - 07:23 | 5853231 falak pema
falak pema's picture

The CBs have no other choice in this mad currency war and anti-deflation print to infinity race; which is a dichotomy of awesome magnitude in itself; but to make the banking sector BLEED via negative rates and excessive money pumping.

The banks are now the runaway machine of debt recycling to feed the oligarchy at the expense of the nation state. This is now clear to all. Its ONE or the OTHER.

The objective of the neo-statists is to KILL the casino of the Oligarchs and resurrect the real commercial economy, to save their own hold on the nation as the elected ones.

So awesome a task now being conducted by the neo-statists (the same ones that are from the hollowed out political centre of Clintonian-Blair style democratic mold who served the Oligarchy as crony fellow travellers) who now panic to save their own future. As their neo-con rival clique who RUN the world-- deep fried in Reaganomics, died in the wool Oligarchy-- only believe in the THREE universal rules of the neo-liberal age  of Reagan/Thatcher inception :

protect its Caymanista wealth now growing exponentially, come what may, using the banks and "easy money carry trades" where you earn huge margins all the while you "sleep in the Caymans".

Use the "slave labour arbitrage" meme to make huge profits in the Corporates whose shares you hold. A return to international serfdom is the only way the 1% thrive off the 99%.

 Use the permanent asymmetric wars meme to protect the 1% wealth from being encroached by populist rebellions from ANY direction: from the populist underbelly of the fast financially rampaged first world or from the "fundamentalist rabble" of the miserable, militarily and financially sodomised (in RM plays), increasingly socially fractured third world.

When thieves fall out... the Statist world of bureaucracy now fights the legacy of the Oligarchy neo-cons ! 

We are all on the Titanic as the world falls apart under peak energy and peak climate/eco destruction.

Wed, 03/04/2015 - 07:30 | 5853244 negative rates
negative rates's picture

Long live the Titanic, and Coney Island.

Wed, 03/04/2015 - 07:57 | 5853277 Atomizer
Atomizer's picture

Central banker blip.

/sarc

Wed, 03/04/2015 - 08:04 | 5853285 Atomizer
Atomizer's picture

Your money market account is ours unless you feed the camels.

Wed, 03/04/2015 - 08:16 | 5853299 kowalli
kowalli's picture

interest rate cuts will go even faster

Wed, 03/04/2015 - 09:38 | 5853504 SDRII
SDRII's picture

And what happens to the Current Account in India if oil prices do actually stabilize and move higher? The rate cut should fix those NPLs

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