The US Federal Reserve rate-cut of 25 basis points to 4.25%, is not likely to have any impact on domestic interest rates, according to bankers. Most bankers said the decision by the Federal Open Market Committee to lower the benchmark rate, was primarily to address the economic slowdown in the US. However, the new Fed rate may bring down the borrowing (dollar) cost on overseas exposures of corporates and banks. There was more likelihood of an increase in foreign exchange inflows, a few bankers opined but domestic rates will remain unaffected by the Fed rate cut, they added.
?Domestic rates are more linked to the slowdown in credit offtake,? said a senior official at a government-owned bank. ?Interest rates are likely to rise over the next 6 months,? said Parthasarathi Mukherjee, president, Axis Bank. There is a downward pressure on domestic rates, and it is more so due to a business decision to boost credit, than a result of the Fed move.
