RBI governor Shaktikanta Das has said that India’s central bank will closely watch the trajectory of inflation before bringing down borrowing costs.
Das was speaking to CNBC just days ahead of a possible rate by the US Federal Reserve.
His statement reiterates the position held by the Reserve Bank of India that it will not follow other central banks and changes to its monetary policy will depend on domestic considerations.
Presently, the majority of the RBI’s monetary policy committee, which sets the interest rate, are in favour of durably aligning India’s headline inflation to its medium term target of 4 per cent.
The RBI governor said in the interview that though ``this seems to be rate-cut season... but on a serious note, you see our monetary policy will be governed primarily, I would like to stress primarily, by our domestic macroeconomic conditions, by our domestic inflation, growth dynamics and the outlook’’.
The US Federal Reserve is widely expected to bring down interest rates by at least 25 basis points later this week.
Recently, both the Bank of England and the European Central bank had slashed borrowing costs by quarter of a percentage point.
``We will not be influenced by how much of a rate cut they are doing, whether it is 25 or 50 or how often and what is the frequency of their rate cuts,” Das told the channel.
Asked if MPC will consider a rate cut at its meeting next month, Das said that while he cannot comment on that, it will examine the pace of inflation. He pointed out that the rate of inflation fell below the threshold of 4 per cent in July at 3.6 per cent and remained thereabout at 3.7 per cent in August.
“So, it is not so much how the inflation is now; we have to look at for the next six months, for the next one year, what is the outlook on inflation. So, therefore, I would like to sort of step back and look more carefully at what is the future trajectory of inflation and growth, and based on that, we will take a decision,” he said.