4 of 7 RBI Panel Members Favored An Interest Rate Cut

Four of the seven Members recommended a reduction in the policy repo rate, in the recent Reserve Bank of India Monetary policy Meet.

Three of them suggested a reduction of 25 basis points, an RBI release said. According to these Members, firstly, headline inflation target for January 2016 will be comfortably met. Secondly, domestic demand condition is weak and growth in bank credit, industrial production and exports are low.

Thirdly, the fiscal situation is showing signs of improvement, with deficits coming down and the composition of government expenditure shifting towards capex. Fourthly, the US Fed may raise rates later this year.

Therefore, the Members felt that the time is opportune to use the space that is available for a reduction in the policy repo rate. The fourth Member advocated a reduction in policy repo rate by 50 basis points as the real economy continues to be very weak, inflation risks are receding and both the fiscal and current account deficits are under control.

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Story first published: Wednesday, August 26, 2015, 10:13 [IST]

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