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The Reserve Bank of India Governor, Dr D. Subbarao, today said he cannot speculate on when he will start cutting policy rates, but assured that the central bank will ensure that there is enough liquidity in the system by conducting open market operations.
“We have taken into account the inflation situation and also growth moderation. For the moment, we have kept the policy rates steady. However, we will manage liquidity through market operations (but) I cannot speculate when we might start cutting rates,” he said while speaking to reporters at an ICAI function here.
In its mid-quarterly review of monetary policy today, RBI today maintained repo (rate at which banks borrow from RBI) at 8.5 per cent, reverse repo (rate at which the RBI borrows from banks) at 7.5 per cent.
On the steep fall in the rupee, he said, “Certainly, it will put pressure on inflation, and we have acknowledged that in our review today.”
The domestic currency had been on a free-fall and it plunged to an all-time record low of sub-54 level yesterday during intra-day.
Last evening, the RBI moved swiftly to check the slide in rupee value and speculation by imposing restrictions on forward trading in the local currency by FIIs and traders and by capping banks’ exposure to the forex market.
The impact of RBI’s steps was visible today with the rupee surging 143 paise to Rs 52.21 per US dollar in early trade today.
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