There is room to cut rates, but time isn’t right: RBI governor

. MUMBAI: Two academics on the RBI’s monetary policy committee — Nagesh Kumar and Ram Singh — called for shifting the policy stance to accommodative, citing subdued inflation and the need to support growth but governor Sanjay Malhotra said such a move would amount to giving “definitive forward guidance” on the next step, which he felt was inappropriate given global uncertainty. The minutes of the Sept 29–Oct 1 MPC meeting released by RBI on Wednesday showed that most members felt that a rate cut at this point would be a “waste of ammunition”. “Growth remains below our aspirations,” Malhotra said. “The benign outlook for headline and core inflation as a result of the downward revision of projections opens up policy space to further support growth. Even though there is policy space to further cut the policy rate, I feel this is not the opportune time for the same as it will not have the desirable impact,” Malhotra added. The MPC unanimously voted to keep the repo rate unchanged at 5.5% and retained its neutral stance. Kumar said the “external context has changed dramatically” since the Aug meeting. “Before we could absorb the 25+25% reciprocal and penal tariffs on goods that became effective from the end of Aug, a hefty $100,000 fee was imposed on H1B visas,” he said. High penal tariffs imposed by the US on India have the prospect of affecting MSMEs and jobs in a significant manner, he said. While inflation at 2.6% has created “policy space for monetary action”, Kumar said it was better to wait until Dec before deciding on a rate cut. “Nevertheless, we may like to signal readiness by changing the stance from ‘neutral’ to ‘accommodative’,” he added. End of Article