India’s central Bank cut rates

The Reserve bank of India has cut interest rates again, which is the second time in just two weeks as they aim to protect their economy from the global economic slowdown.

The central bank has cut rates from 8 percent to 7.5 as well as reducing the amount of money that lenders are required to set aside in their reserves from 6.5 percent to 5.5 percent, as well as reducing government bond requirements.

This is seen by economists as a firm indication that the Indian central bank has reverted its policy bank on to growth, as by cutting interest rates in line with the rest of the central banks and by drastically reducing borrowing costs, the rupee is still weakening.

Up until the end of last week, it was clear that the central bank placed equal focus on growth and protecting against inflation.

By raising import costs, the weaker rupee has been protected against, however the currency has fallen 20 percent since January and is now trading at 49.4575 per dollar.

The Indian money market rates have tripled since the end of last week and against the rest of the Asian countries where interbank lending has actually fallen, India’s economy has seen liquidity vastly improve.

The overnight call rate in India touched 21 percent on Friday and in a bid to increase cash, India’s 10-year bonds have increased.

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