Govt hopes RBI will cut interest rate next month

By: | Published: August 4, 2015 9:10 PM

With inflation under control, the government hopes that RBI, which has maintained status quo in today's monetary policy review, will cut interest rate next month to boost much-needed investments and growth.

rbi rate cutWith inflation under control, the government hopes that RBI, which has maintained status quo in today’s monetary policy review, will cut interest rate next month to boost much-needed investments and growth. (PTI)

With inflation under control, the government hopes that RBI, which has maintained status quo in today’s monetary policy review, will cut interest rate next month to boost much-needed investments and growth.

The Reserve Bank, said the Finance Ministry sources, will take into account the impact of monsoon, likely crop yield and policy action by US Federal Reserve, and in all likelihood announce a cut in the key interest rate.

While unveiling the third bi-monthly monetary policy in the current fiscal, RBI Governor Raghuram Rajan refrained from reducing the rates despite pressure from the industry as well as the government.

However, Rajan indicated that he could cut interest rates ahead of the next policy review on September 29 depending upon macro-economic indicators.

According to the ministry officials, RBI will have to take preemptive steps next month to counter flight of capital following any likely increase in interest rates by US Federal Reserve.

“There could be a rate cut by RBI in September as the instance of Federal Reserve would clear by that time. By that time, the outcome of the monsoon and its effect on crops will also be known,” said one official.

RBI has reduced the interest rates by a total of 0.75 per cent in three tranches since January this year.

After three cuts in seven months, the RBI in today’s policy decided to keep the benchmark lending (repo) rate unchanged at 7.25 per cent as also the cash reserve ratio (CRR) at 4 per cent.

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