Does RBI know whether it’s coming or going?

The Reserve Bank of India (RBI) resumed its monetary easing this week and came through with a widely expected 25 bps cut (100 bps make 1 percent) in the repo rate to 7.75 percent. This was the first cut in nine months. Governor D Subbarao seemed to be in a generous mood as, despite the sobering macro assessment on the eve of the policy meeting which appeared to favour maintaining the status quo, he complemented the rate cut with a similar sized cut in the cash reserve ratio (CRR) to a record low of 4 percent.

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