One of the three newly inducted external members in the panel pushed for a 25 basis points (0.25 percentage points) rate cut, perhaps citing the decline in the headline inflation rate below the RBI’s median target of 4% in July and August. The panel has not altered its 4.5% projection for retail inflation and its GDP growth estimate of 7.2% through 2024-25, but has reworked the math. While food inflation remains a worry, with vegetable prices spiking again, the central bank Governor Shaktikanta Das has also flagged that core inflation (excluding food and energy costs) has bottomed out. Perhaps, if these risks remain only on paper, it is plausible to expect a rate cut in February. But with the European Central Bank likely to cut interest rates too, and U.S. inflation dropping to a three-year low, prompting talk of another rate cut soon, the RBI may have to act faster.

Source: The Hindu October 15, 2024 01:02 UTC