Money & Banking

RBI Governor says 35 bps rate cut balanced, based on data

PTI Mumbai | Updated on August 07, 2019

“Too much should not be read into it, it is judgement call which the MPC has taken,” RBI Governor Shaktikanta Das said. File Photo   -  Bloomberg

“While 0.25 percentage points reduction would have been inadequate, 0.50 percentage points would have been excessive”

Governor Shaktikanta Das on Wednesday termed the steeper 0.35 per cent repo rate cut as a “balanced” call given the domestic and global developments. He explained that a 0.25 percentage points reduction, as it has done thrice this year since February, would have been “inadequate”, while a 0.50 percentage points cut would have been “excessive”.

The six-member Monetary Policy Committee (MPC) for the fourth consecutive times in a 4:2 vote resolved to cut the rates by 0.35 per cent, taking the total cuts during 2019 to 1.10 per cent to a near record low of 5.40 per cent.

Read more: RBI cuts repo rate by 35 bps

Das said the RBI has been pre-emptive in its actions on rates and the policy stance through the year and has also provided adequate liquidity to the system always. Addressing the media at the customary post-policy presser, Das said there is nothing sacred about multiples of 0.25 per cent cuts and also made it clear that the rate call cut has not been taken on “gut feel” but on hard data. “Too much should not be read into it, it is judgement call which the MPC has taken,” he said, adding that it was “prudent” to be accommodative. The RBI will ensure that there is sufficient liquidity is available for the economy.”

Expressing satisfaction on the transmission process by saying that the financial markets have fully absorbed the benefits of the three past rate cuts and expressed confidence that there will be more rate cuts in the future by the banks. Das said the decision of the MPC is its “own autonomous, independent decision.”

To a question on real interest rates and the levels which the central bank is targeting, he said this is not the right time to look at that aspect as the RBI focus is to meet the output gap.

Published on August 07, 2019

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