Mint Quick Edit | Suspense over RBI policy: Is a jumbo rate cut likely?
With inflation under control, it seems likely that the Reserve Bank of India (RBI) will cut its policy repo rate on Friday. Many observers expect no less. Whether it’ll be a quarter of a percentage point cut or half has been under debate.
Also Read: RBI’s policy review: Why this time is truly different
To the comfort of monetary policymakers, inflation has been below RBI’s 4%-target for some months now and could drop below 3% in May. Besides, crude oil prices have been stable, diminishing the risk of an inflated import bill. Meanwhile, India’s economy grew a robust 7.4% in the three months through March, although America’s disruptive trade policy could get in the way of this momentum.
Also Read: Ajit Ranade: RBI’s increasing fiscal support deserves a closer look
Having shifted to an accommodative policy stance, RBI has indicated an intention to soften rates of interest. It has already reduced the repo rate twice by a quarter-point each. Another reduction of that quantum looks imminent, although SBI Research and others expect a half-point cut.
Also Read: More than a rate cut: RBI’s decision reinforces its dual mandate
This sort of front-loaded monetary easing would send banks an unambiguous signal to slash their lending rates. RBI has been known for cautious moves. But governor Sanjay Malhotra hasn’t yet revealed the approach he favours. The suspense will end soon.
Post Comment