India Cuts Key Rates for a Fourth Time Since October

By Kartik Goyal and Anil Varma

Jan. 2 (Bloomberg) -- India’s central bank cut interest rates for the fourth time in less than three months, extending the steepest set of reductions since 2000, as inflation cooled.
The Reserve Bank of India cut the repurchase rate to 5.5 percent from 6.5 percent and the reverse-repurchase rate to 4 percent from 5 percent, it said in a statement in Mumbai. The monetary authority also cut the so-called cash reserve ratio, or the proportion of deposits banks must hold in reserve, to 5 percent from 5.5 percent, releasing 200 billion rupees ($4.1 billion) into the banking system.
India is also preparing to announce its second stimulus package in a month today to counter the impact of a global recession on Asia’s third-largest economy. The government will unveil measures later today in New Delhi, spokesman Umakant Mishra said, without providing details. India announced excise duty cuts and a 200 billion-rupee ($4 billion) spending plan last month.
Slowing inflation prompted central banks from the U.S. to Malaysia to cut interest rates as economies slow globally. China cut interest rates for the fifth time in three months on Dec. 22 to support the world’s fourth-biggest economy. The Bank of Japan reduced its key rate to 0.1 percent on Dec. 19 and the U.S. Federal Reserve lowered its main rate to as low as zero on Dec. 16.
India’s inflation slowed to 6.38 percent in the week to Dec. 20 after a drop in crude oil costs helped cool price gains from a 16-year high of 12.91 percent in August. Crude oil has tumbled more than 70 percent from a record $147.27 a barrel on July 11.