RBI Governor Shaktikanta Das Responds to Piyush Goyal's Rate Cut Suggestion, Hints at December Policy - Read Now
Union Minister Piyush Goyal and RBI Governor Shaktikanta Das Responding to the suggestion of Union Minister Piyush Goyal that interest rates should be cut, Reserve Bank of India (RBI) Governor Shaktikanta Das appeared to sound a note that the decision may indeed come in December, that, he has kept to himself. Das and Goyal were both present at the CNBC-TV18 Global Leadership Summit held here when Goyal made his personal stance clear that the RBI should "definitely cut interest rates."
Goyal's suggestion was answered by Das through a diplomatic tone when he said with a smile, "The next Monetary Policy is coming up in the first week of December. I would like to reserve my comments for that." The coming RBI Monetary Policy Committee (MPC) meeting, which happens within the first week of December, thus comes sharply into focus at a time when inflationary concerns are mounting.
Goyal Demands Rate Cut with Inflation on the Rise
Commerce Minister Piyush Goyal had his personal views on interest rates at the summit, indicating that "RBI must cut interest rates." Goyal said that bringing food inflation into the decision-making process is "wrong." "This is my personal view and not that of the government," he clarified. Goyal seems confident that inflation would ease by December, as he said that a rate cut would then catalyze growth without having any more adverse impact on inflation.
Stance of RBI on interest rates and inflationary worries
The RBI's MPC left the repo rate unchanged at 6.5 per cent in October, but remarkably, changed from a "withdrawal of accommodation" position to a "neutral" position which gives the RBI allowance for more flexibility when it decides on its future interest-rate adjustments. Das was quoted saying that the fight against inflation has been a constant frustration for central bankers since it pits the considerations of "acting too little or too late" against "acting too much or too early".
But hopes of a rate cut during December were temperd when India's recent inflation data came in. Consumer Price Index Inflation rose to a 14-month high at 6.2 percent in October and, hence, left the upper tolerance limit by RBI at 6 percent. Many of the analysts now speculate that RBI would go for keeping it at existing rate levels rather than at cut in the policy meeting.
Market Impact and Insights into Thoughts of Experts on December Policy
While the December policy meet approaches, the market stays on tenterhooks as inflation figures indicate that the RBI may be careful with rate cuts. Experts claim continued inflation in food prices to force the RBI into status quo for the eleventh consecutive time. The stance of the MPC and what Das said at the Global Leadership Summit have added to expectation as stakeholders await clearer indications of what is lined up by the RBI in December.
Das and Goyal's Vision Express Divergent Concerns
Two central authorities at the summit differ between Das' concern regarding the management of inflation and Goyal's interest in the growth that a cut-off rate would generate. Unlike Goyal, who provoked the audience with one economic consideration of the rate cut, "the other is growth," it seems that Das focuses on the primary objective of the RBI regarding the management of inflation. The reply that the governor gives hints that the RBI pays attention to economic measures and will act based on shifting data and trends in inflation.
