rbi-to-wait-and-watch-before-further-rate-cuts

With the country’s retail inflation figures showing a downward trend, the Reserve Bank of India (RBI) said it has not yet decided on initiating further rate cuts.
The RBI's Monetary Policy Committee (MPC) has so far announced three massive repo rate cuts in the year since February, cumulatively reducing the repo rate by 100 points.

In an interview, the central bank’s governor, Sanjay Malhotra, said they will “wait and watch” the evolving situation before deciding on any further rate cut, since they believe that both “growth and price stability are equally important”.

On speculation of a rate cut of three percent to be announced next, Malhotra explained that internal assessments are done on inflation outlook and since those calculations are still in the process of being done, he is not in a position to comment on it.

 

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“We will certainly come out with our latest projections, and the MPC, as always, will factor in the evolving situation in the outlook, and then take a call as to what kind of policy rate the economy really needs.

If inflation is lower – the forecast, therefore the outlook is lower – or growth is lower, certainly policy rates can be cut, but that is something we have to wait and watch,” he said.

The RBI’s rate-setting panel MPC is scheduled to meet early next  month.

On being asked if a dip in growth worries him, Malhotra said he believes that both growth numbers and price stability are important. 

“As you are aware, we primarily look at price stability – that is our core mandate, our primary objective – and then we look at growth also. Both are equally important. I would not say that we give more emphasis as of now to either number," he said.

While acknowledging that rate cut transmission is still in early stages of transmission, Malhotra said he has figures till May. “In June, we cut by 50 basis points. So, there's a long journey yet to 100 basis points. Till May, it was 24 basis points. My sense is that it has improved, but there is still distance for us to cover," he noted.