RBI Governor Says It’s Too Early to Talk About an Interest Rate Cut
The Reserve Bank of India (RBI) Governor, Shaktikanta Das, emphasized on July 11 that it is premature to discuss an interest rate cut in the current uncertain economic environment, with inflation hovering close to 5%.
“The overall economic environment globally and in India is so uncertain that it’s premature to talk about an interest rate cut. Additionally, CPI headline inflation remains close to 5%, and surveys suggest it will stay around this level. Thus, it’s too early to talk about reducing interest rates,” Governor Das stated during an interview with CNBC-TV18.
In the June monetary policy announced on June 7, the RBI-led Monetary Policy Committee (MPC) decided by majority to keep key interest rates unchanged, citing persistent risks on the inflation front.
“I prefer not to provide any forward guidance that might mislead market players, stakeholders, and others,” Das added, emphasizing caution in policy communication.
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Inflation Target and Economic Balance
Das pointed out that while the inflation target is 4%, the current inflation rate is still around 5%. “The expectation is that inflation will moderate, and indeed it is moderating, but the pace is very slow. If we want faster alignment of inflation to the target, monetary policy should be much tighter. However, we have chosen a balanced approach between growth and inflation, taking a calibrated path to align inflation with the target,” he explained.
The governor noted that there is still a significant distance to the 4% target, with current inflation 70 basis points away, potentially reaching 80 basis points. “Given this distance, it’s early to talk about a change in stance,” Das concluded.
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Market Reactions and Future Outlook
The current stance reflects the RBI’s cautious approach amidst the economic uncertainty. The focus remains on monitoring inflation trends and economic conditions before making any significant policy shifts.
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