RBI no chance to cut repo rate...!? Why?

Sowmiya Sriram
RBI no chance to cut repo rate...!? Why?
The decision was announced today after the two-day monetary policy meeting chaired by RBI governor Shaktikanta Das began on october 4. While the RBI is tipped to keep the repo rate unchanged amid rising inflation and crude oil prices, there is considerable room for scope. At the same time, the market is well funded with an additional Rs 50,000 crore of liquidity due to the rising CRR rate, as liquidity in the market is over Rs 2 lakh crore. However retail inflation forecasts play an important role. Thus there are some important reasons to keep the repo rate and monetary policy constant.
Food Inflation: Although food inflation is unlikely to rise to 11-13 percent in the July-September quarter, variable rainfall has kept food inflation high. Similarly, many international problems have kept the price of oilseeds high. As a result, inflationary controls cannot be eased i.e. repo rate cannot be reduced.
 Retail Inflation: India's retail inflation remains high. Especially since the RBI's target of 4 percent is still high, making monetary policy less likely to ease.
US bond investments: RBI should keep the repo rate high at least till the december quarter due to high returns on US bond investments. Apart from this, the central government's fiscal deficit target and the country's economic growth also play an important role.

Find Out More:

Related Articles: