ADVERTISEMENT
Das signals longer wait for rate cut despite inflation dipThe RBI has kept key policy interest rates unchanged for the past 18 months. In almost all policy reviews in the past one year, the governor emphasised on the need for bringing down inflation to the mandated target of 4% on a sustainable basis.
Gyanendra Keshri
Last Updated IST
Shaktikanta Das
Shaktikanta Das

New Delhi: Reserve Bank of India (RBI) Governor Shaktikanta Das, on Friday, indicated that the central bank is unlikely to change its monetary policy stance and lower interest rates in the upcoming meetings despite inflation coming within its median target of 4% for the second successive month in August.

“Inflation has moderated from its peak of 7.8% in April 2022 into the tolerance band of +/- 2 per cent around the target of 4%, but we still have a distance to cover and cannot afford to look the other way," Das said at a forum organised by the Bretton Woods Committee in Singapore.

The RBI has kept key policy interest rates unchanged for the past 18 months. In almost all policy reviews in the past one year, the governor emphasised on the need for bringing down inflation to the mandated target of 4% on a sustainable basis.

ADVERTISEMENT

The Consumer Price Index-based (CPI) inflation, which the RBI’s Monetary Policy Committee monitors for its policy action, declined below 4% in July for the first time in five years, at 3.6%. It came in at 3.65% in August.

Despite the substantial easing in inflation, the RBI governor said he was not in a hurry to cut rates. “We have been reiterating the importance to stay the course and not get carried away by some dips in inflation,” he said.

Das underlined that the market expectations of rate cuts are now regaining momentum, especially after indications of a policy pivot from the United States Federal Reserve, but the adverse spillovers from the ‘higher for longer’ interest rate scenario remains a contingent risk.

The upcoming meeting of the Fed to decide on the policy interest rates is scheduled on September 17-18, wherein it is widely expected to cut policy rates by 25 basis points. Some analysts are also betting for a larger cut of 50 basis points.

Though the US Fed interest rate action impacts markets and monetary policy globally, Das said the central banks should decide on their policy keeping in mind their domestic inflation-growth balance.

“There are central banks which naturally and justifiably remain averse to premature loosening of policy before inflation has been durably reined in their countries. Central Banks in these countries need to remain watchful of their domestic inflation–growth balance and make policy choices,” he said.

Meanwhile, analysts are divided, with some predicting that the RBI may start easing monetary policy from October, while others say that any cut will not happen before December. The next meeting of the RBI’s MPC is scheduled during October 7-9.

ADVERTISEMENT
(Published 14 September 2024, 07:02 IST)