RBI Governor Raghuram Rajan may cut interest rates ahead of December 2 policy announcement RBI Governor Raghuram Rajan may have ignored the overwhelming demand for an interest rate cut at the last meeting of the monetary policy Technical Advisory Committee, but he may find it difficult do so next month ahead of the December 2 policy announcement. The sliding prices of commodities — from crude oil to tomatoes — along with the still-uncertain economic revival, slowing loan demand and improving governance may all possibly add up to Rajan having to begin easing the interest rate cycle earlier than expected. Furthermore, the political class may also be getting impatient with the government having tightened up administration. Some ministers are expecting a cut of as much as 50 basis points in the repo rate, at which RBI lends to banks. Rajan has raised the benchmark rate three times since he took charge in September last year to 8%. A basis point is one-hundredth of a percentage point. Retail inflation dropped to a low of 6.46% in September, below the 8% target for January 2015, and closer to January 2016s target of 6%. But the catch is that once the base effect fades, the measure is expected to accelerate again by early next year. In fact, the RBI model forecasts 7% retail inflation by March 2016, which may be revised lower if commodity prices keep falling. This has prompted some in the government, which under Narendra Modi has been relatively non-interventionist unlike the previous one, to begin talking up the advantages of an interest rate cut. In its September assessment, RBI said monetary policy in disinflationary mode along with normal monsoons next year could mute the momentum of headline inflation. SOURCE : THE ECONOMIC TIMES , 05 NOVEMBER 2014
Posted on: Wed, 05 Nov 2014 14:01:05 +0000
Trending Topics
Recently Viewed Topics
© 2015