‘We will have to wait now to cut the repo rate’- RBI Governor Shaktikanta Das

New Delhi| There is little hope of recent reduction in basic interest rates i.e. repo rate. Reserve Bank of India (RBI) Governor Shaktikanta Das said during an event on Monday that the decision to soften interest rates will not be decided on monthly data but on the basis of long-term inflation situation.

The next meeting of the Monetary Policy Committee (MPC), headed by the RBI Governor, is scheduled to be held between October 7 and 9, in which interest rates are to be decided. The Reserve Bank of India had kept the repo rate unchanged at 6.5 per cent for the ninth consecutive time amid risks of rising food prices in the last meeting held in August. At the August meeting, four out of six MPC members had voted in favor of keeping interest rates unchanged. In an interview to CNBC International, Das said that we will be at a month-on-month pace on the inflation front. Whether inflation is rising or falling will be carefully monitored and decisions will be made based on that assessment.

“It is not a question that in the current context, like in July, inflation came down to around 3.6 per cent, which is the revised number, and to 3.7 per cent in August”, the RBI governor said. It’s not so important how inflation is right now; we have to look at what the inflation trend is for the next six months, for the next one year” “So, I would like to take a step back and look more carefully at what the future trajectory of inflation and growth is, and based on that, we will make decisions”, Das said.

Asked whether the RBI’s Monetary Policy Committee (MPC) would actively consider cutting rates in early October, Das replied, “No, I can’t say that” RBI Governor said, “We will discuss in the MPC and take a decision”. But as far as growth and inflation dynamics are concerned, I would like to make two points” “One, the pace of growth remains good, India’s growth story remains intact and as far as the inflation outlook is concerned, we have to look at the pace from month to month”, he said. He said that a decision will be taken on this basis.

Das further said that the rupee has been one of the least volatile currencies globally, especially since early 2023. “The rupee has remained fairly stable against the US dollar and the volatility index”, he said Asked why the RBI did not allow more volatility in the rupee, the Governor said, “If you allow volatility, who benefits from it? This does not benefit the economy. Then why would we allow instability?” He further clarified that fluctuations in exchange rates were natural, but excessive volatility would be disadvantageous.

“Our stated policy is to prevent excessive volatility in the rupee”, he said The RBI Governor further said that maintaining a stable rupee creates confidence in the market, investors and the broader economy. Das further said that RBI is committed to maintaining financial stability and the bank will take steps to ensure the same.