India’s Central Bank May Continue Cutting Rates

India’s central bank indicated it may keep cutting interest rates after economic growth slowed to a five-year low last quarter.

The Reserve Bank of India yesterday reduced the benchmark repurchase rate to a record low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent, adding it will “maintain ample liquidity in the banking system”.

Governor Duvvuri Subbarao is driving policy rates down to unprecedented lows to revive investment and spur consumption in Asia’s third-largest economy. The $1.2 trillion economy is slowing as exports decline and companies access to funds from overseas and from the stock market is cut off by the global recession.

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