Reserve Bank of India (RBI) Governor Shaktikanta Das has dashed hopes of a cut in interest rates anytime soon. Speaking with CNBC-TV18's Shereen Bhan from the sidelines of the World Economic Forum (WEF) 2024, Das said, "our policy has to remain actively disinflationary till we reach the target of 4% on a durable or sustainable basis, and that is our current stance."
Das explained that a stable inflation or price stability is the bedrock for sustainable growth, and a premature pivot in policy can prove costly for the economy.
The latest inflation data had led to anticipation that the RBI's monetary policy committee (MPC) will cut interest rates sooner-than-expected. The December
consumer price index (CPI) data came in at 5.69%, much lower than 6% plus number that economists were expecting. The latest print meant that the rise in consumer prices averaged 5.4%, well below the RBI's 5.6% forecast. The RBI has a 2-6% comfort range for inflation.
The MPC has upped the benchmark repo rate six times since April 2022, from a low of 4% to 6.5% currently. It has also named its stance “as withdrawal of accommodation”, referring to the low rates that the economy enjoyed before the hike. Economists at Citi India and ICICI Securities Primary Dealership were expecting the stance may now change to “neutral” as early as in February.
The RBI has held on the current repo rate of 6.5% for nearly a year. A rate cut in the repo rate will have a cascading effect on bank loan rates, including consumer loans and will help cut EMIs.
Speaking about the growth estimates, Governor Das said when the RBI raised it's projection for the current year to 7% from 6.5%, it was seen as being too optimistic even though RBI considered it a conservative estimate. However, the
first advance forecast for gross domestic report (GDP) released by the National Statistics Organisation (NSO) has now pegged the growth at 7.3%, he highlighted. For the next year too, the central bank expects growth touching 7% and this would mean four successive years of growth at 7% or more, Das noted.
(Edited by : Shweta Mungre)
First Published: Jan 18, 2024 5:33 PM IST
