RBI Governor says it's too early to talk on interest rate cut

Shaktikanta Das

The Reserve Bank of India’s (RBI) Governor Shaktikanta Das on July 11 said it is too early to talk on the interest rate cut due to uncertain economic environment and inflation remaining closed to five percent.

“The overall economic environment globally and in India is so uncertain to talk in terms of interest rate cut. Second thing is CPI headline inflation continues to be close to 5 percent and according to surveys done it is expected to close 5 percent and I think it is too early to talk on interest rate cut,” the governor said during an interview with CNBC-TV18.

In the June monetary policy that was announced on June 7, the RBI-led Monetary Policy Committee (MPC) left the key interest rates unchanged by a majority decision of the panel members, citing continuing risks on the inflation front.

"I would rather not give any kind of forward guidance which may lead the market players, stakeholders and others to board the wrong train," Das further said.

On the stance front das said there is a reason for that. Target is 4 percent and we are nowhere near the target, we are still around 5 percent, the expectation is that it will moderate and indeed it is moderating. But the pace of moderation is very slow. If we want faster alignment of inflation to the target, the monetary policy should be much tighter.

Further he added that we have not done it because we maintain balance between growth and inflation, so we have not done it and chosen calibrated path to align the inflation with target.

"So we are quite a distance away from 4 percent target, given the distance what we have which is currently 70 basis points, which may go to 80 bps, so its early to talk on change in stance," Das said.