Reserve Bank of India

February 3, 2015

India’s is one of the central banks that already had cut interest rates this year in response to the disinflationary impact of the price of oil and other key commodities.  See my earlier review of the 25-basis point cut on January 15 following an unscheduled meeting of Reserve Bank of India policymakers.  Today was the first scheduled meeting since that action, and analysts were pretty much evenly divided over whether there were be a follow-up rate reduction.  Governor Rajan and his cohorts instead decided to wait: “The Reserve Bank also indicated that “key to further easing are data that confirm continuing disinflationary pressures. Also critical would be sustained high quality fiscal consolidation…”. Given that there have been no substantial new developments on the disinflationary process or on the fiscal outlook since January 15, it is appropriate for the Reserve Bank to await them and maintain the current interest rate stance.”  In the latest bi-monthly Monetary Policy Review, the reverse repo interest rate was left at 6.75% and the cash reserve requirement was kept at 4.0%, but the statutory liquidity rate was cut 50 basis points to 21.5%. 

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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