The US Fed’s outsized rate cut “will not significantly impact foreign inflows” into India, Economic Affairs Secretary Ajay Seth said on Thursday. The Fed has done what it assesses was good for the US economy and the Reserve Bank of India (RBI) will decide on interest rate cuts keeping the Indian economy in mind, he said.
The US Fed lowered its benchmark interest rate by 50 basis points Wednesday, in its resolve not to fall behind the curve in easing, and altering policy landscape for other major central banks, including those in emerging market economies.
“It is a positive for the global economy, including the Indian economy. It is a 50 basis points cut from a high level. I don’t see that making any significant impact on inflows. We have to see from (the point of) where the (US interest rates) levels are. We have to see how do other economies’ markets behave,” Seth said.
The Reserve Bank of India’s Monetary Policy Committee meeting is scheduled for October 7-9.
“This is for MPC to take a decision at apt time. Their decision is based on what is good for the Indian economy. You should not read too much into the event which happened yesterday,” Seth said when asked whether RBI would now start to cut interest rates.
Separately, chief economic advisor V Anantha Nageswaran also said the impact of the US Fed rate cut will be muted for India as it was mostly priced in. “The impact on India will be little muted… much of it (rate cut) priced in,” Nageswaran said at Deloitte’s Government Summit 2024.
The RBI has left the repo rate unchanged at 6.50 per cent since February 2023 as it tackled to bring down inflation to 4% on a durable basis. The CPI inflation inched up marginally to 3.7% in August from 3.5% in July, largely on account of an uptick in food inflation.