Economists divided on RBI rate cut demand | Business Line

Economists divided on RBI rate cut demand | Business Line


In all probability, the common sense perception is that RBI will, on September 29, or a little later, cut the base rates by 25 basis points. That will satisfy the finance ministry with which Dr Rajan has to at least maintain the present comfort level for several reasons much beyond repo rates. By opting for such a stance, which will not have much impact on any of the economic indicators including inflation till end FY 2016, will also silence the other ‘school’ of economists for the time being. After all the impact of the earlier rate cuts aggregating 75 basis points is yet to percolate, fully, to the ground level.
To buy peace for an extra month between reviews, RBI should consider reverting to quarterly schedule for Monetary Policy Review. There are enough fora for RBI to share its mind on policy issues between such reviews and technically, monetary policy measures including revision of base rates need not always coincide with such reviews. Lesser frequency of reviews may reduce scope for external pressures and lobbying also to that extent.
M G Warrier, Mumbai


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