India cuts, Brazil keeps interest rate on hold

MUMBAI / BRASILIA – Agence France-Presse

Reserve Bank of India (RBI) Governor Shaktikanta Das.

India’s central bank cut interest rates yesterday in a move seen as a boost to Prime Minister Narendra Modi ahead of general elections due this year.

The Reserve Bank of India (RBI) said the benchmark repo rate -- the level at which it lends to commercial banks -- would be reduced by 25 basis points to 6.25 percent.

It marked the first interest rate decision under new bank chief Shaktikanta Das, an ally of Modi who was appointed in December after his predecessor, Urjit Patel, quit following a public spat with the administration over alleged government interference.

The government was believed to be unhappy with the RBI over a number of issues, including its apparent reluctance to cut rates.

India’s finance ministry had reportedly been pressuring the bank to enact policies to help spur growth ahead of the elections, when Modi will run for a second term.

The RBI raised rates twice last year over concerns about inflation.

Meanwhile, Brazil’s central bank on Feb. 6 kept its key rate steady at a historically low 6.5 percent, showing caution as President Jair Bolsonaro’s government readied structural reforms meant to boost the economy.

The decision adopted unanimously by the bank’s Monetary Policy Committee aligned with forecasts by most analysts.

In a statement, the committee said that it has seen a “reduction of inflationary risks” since its last meeting in December.

The central bank has kept is key Selic rate unchanged at 6.5 percent since March 2018.

Economic growth last year was estimated to have been 1.3 percent. Inflation was 3.75 percent. The market projected inflation this year reaching 3.94 percent.