Given the uncertain economic environment and inflation hovering around five per cent, it is premature to consider discussing an interest rate cut, Reserve Bank of India Governor Shaktikanta Das said on Thursday.
“The overall economic environment globally and in India is so uncertain to talk about interest rate cuts. Second thing is CPI headline inflation continues to be close to 5 per cent and according to surveys done it is expected to be close to 5 per cent [for June]; I think it is too early to talk about an interest rate cut,” he said in an interview with CNBC TV18. “I would rather not give any kind of forward guidance which may lead the market players, stakeholders and others to board the wrong train,” he added.
Two of the six members of the RBI’s monetary policy committee voted last month to cut the policy repo rate, arguing that an overly tight policy might hinder economic growth.
The domestic rate-setting panel has kept the repo rate unchanged at 6.50 per cent for more than a year now.
Das further stated that India’s rating upgrade should have happened earlier; however, it should follow through now. India is currently rated BBB-.
“The government has announced a fiscal consolidation path. And the interim budget gave a fiscal deficit of 5.1 per cent. And next year, 2025-2026, it is supposed to be 4.5 per cent, according to the roadmap which the government has given. Things appear to be moving in that direction. So, I think a rating upgrade should happen. It should have happened earlier. But it should happen,” he said.
He also said that the RBI will release the neutral rate after completing the current analysis within 1-2 months. The neutral rate or the real rate of interest is the repo rate minus inflation.
First Published: Jul 11 2024 | 5:49 PM IS