The Hindu Business Line : No signal for low-interest regime, say economists

What has been left unsaid is that this would not signal a low-interest rate regime just yet, said Dr D.K. Joshi, Director and Principal Economist, Crisil.

The move did not surprise him, but he thought this was at best a stop-gap arrangement to tide over the acute liquidity crunch. The prevailing inflation rate may have prevented the RBI from doing an encore with the repo rate.

Mr Abheek Barua, Chief Economist, HDFC Bank, said he was surprised at the RBI move since it was widely perceived that the rates would be held for sometime.

“But I’m glad this has happened, which took a long time coming,” he said. He too agreed with the view that this was being resorted to as a short-term measure with the sole aim of infusing liquidity into the system.

According to Mr Ananda Bhoumik, Senior Director, Fitch Ratings, the RBI move was clearly reflective of the panicky situation on the market front.

The high-voltage repo activity going on in the market may have acted as the trigger for the RBI. Mr Bhoumik viewed the move as having short-term implications only.

Dr Subhada Rao, Chief Economist, YES Bank, said she had expected the Reserve Bank to hold the rate in the short to medium term.

Growth in non-food credit at 26 per cent, and inflation, despite showing signs of moderating, still hovering around 12 per cent, would normally have worked against the logic of effecting a possible cut in CRR, she reasoned.

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