RBI monetary policy review today: Raghuram Rajan likely to cut interest rate by 0.5%

RBI will unveil its first bi-monthly policy review for this fiscal Tuesday amid expectations of a 0.25-0.50 percent cut in interest rates to boost industrial growth and economy.  

Updated: Apr 05, 2016, 10:09 AM IST
PlayRBI monetary policy review today: Raghuram Rajan likely to cut interest rate by 0.5%

Zee Media Bureau

New Delhi: With inflation under check and government sticking to its fiscal consolidation path, the Reserve Bank will unveil its first bi-monthly policy review for this fiscal Tuesday amid expectations of a 0.25-0.50 percent cut in interest rates to boost industrial growth and economy.

Finance Minister Arun Jaitley has also pitched for policy easing, saying high rates could lead to a sluggish economy.

 

Bankers and experts too are expecting lower borrowing costs as the inflation trajectory is down and the government has pledged to stay on the fiscal consolidation path. The government has also pared the small savings interest rate by up to 1.3 per cent providing cushion to the Reserve Bank for cutting the policy rate.

RBI Governor Raghuram Rajan, on February 2, had left the key interest rate unchanged citing inflation risks and growth concerns.

In all, the RBI reduced by repo rate by 1.25 percent in 2015, but it has been frustrated by commercial banks failure to pass on the full benefits to the wider economy.

Complaining of tight liquidity in the financial system, banks only passed on about half of the RBI`s rate reductions to borrowers so far.

And, despite the RBI easing last year more aggressively than at any time since the 2008-2009 global financial crisis, annual economic growth slowed to 7.3 percent in the October-December quarter from 7.7 in the previous quarter.

The slowdown left the economy further adrift of the government`s 8 percent growth target, a rate needed to generate jobs for the millions of Indians joining the workforce each year.

 

Retail inflation as measured by the Consumer Price Index (CPI) eased to 5.18 percent in February as food prices rose at a slower pace, while Wholesale Price Index stayed in the negative territory for the 16th month in a row.

Industrial output for the third month in a row remained in the negative territory contracting 1.5 percent in January due to poor showing of manufacturing sector raising industry clamour for rate cut by the RBI.

With Agency Inputs