Following the two-day meeting by the newly formed Monetary Policy Committee on October 3-4, the Urjit Patel-led Reserve Bank of India is likely to cut its interest rates to 6.0 % to 6.25 % in early 2017. The minutes of the meeting, released today, showed the board’s concern over economic growth and inflation.
With expectations to curb inflation, all the six MPC members had voted for a quarter-point rate cut. The Reserve Bank is also likely to hod the rates for at least 12 months after the rate cuts.
The recent decision by the MPC members to vote for rate cuts came with concerns over curbing inflation and generate economic growth by early 2017. The inflation based on the Wholesale Price index has reduced to 3.5% in September from 3.74 in August and the retail inflation has dropped tp 4.31 % from 5.05 % in August. With the pullback in inflation, hopes of another rate cuts in the next policy review in December, has also been seeded.
The six-member Monetary Policy Committee of the RBI comprises of three Central Bank members and three external members appointed by the government with governor having the final say in it. This is the first time a rate cut decision is taken by the MPC instead of the governor of the central bank.