The Reserve Bank of India (RBI) Governor Sanjay Malhotra on November 24 said macroeconomics indicators are looking good and there is a scope for repo rate cut as communicated in October monetary policy.
“In October, Monetary Policy Committee (MPC) have said there is a scope for further rate cut, since then, whatever data we have received in term of macroeconomic indicators do not reduce the scope for rate cut. There is a scope for further rate cut, but it is up to MPC to decide on rate action in December policy,” Malhotra said during an interview with Zee Business.
He also said that the central bank have two mandates to maintain price stability and maintain growth. “We don’t remain aggressive on growth, nor we remain defensive,” Malhotra said.
On November 21, a Moneycontrol poll of 18 economists, treasury heads and fund managers said that monetary Policy Committee (MPC) of the RBI is likely to cut repo rate by 25 basis points (bps) in the upcoming monetary policy due to comfort provided by the lowest ever Consumer Price Index (CPI) Inflation in the last two months.
If a rate cut happens in December, it will be the first reduction by the central bank after maintaining status quo in last two policies.
The RBI has so far reduced repo rate by 100 bps from 6.5 percent to 5.5 percent between February and June. Post that, the RBI MPC has maintained a status quo in August and October policy meetings.
The MPC will meet between December 3 and 5 for another round of rate setting deliberations.
Malhotra, during the interview with the news channel, also said that the Indian rupee has seen a fall of 3-3.5 percent annually. The fall is a natural fall of the local currency.
On November 21, the local currency depreciated to a record low of 89.49 against the US dollar due to outflows from foreign investors from Indian equities, uncertainty over US-India trade deal, and absence of RBI's support.
The central bank has been supporting the local currency in last few weeks to curb excessive volatility.
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