RBI happy with inflation, another rate cut soon?

Frankfurt: Reserve Bank of India has said it would take into account falling inflation while deciding on policy initiative in its review next month. “We certainly will take note of the softening of inflation and the external payments situation in the next mid-quarter policy statement on June 17,” Subbarao said at an event in Frankfurt yesterday.

He said, he was happy to see that inflation coming down to below 5 percent mark. The headline wholesale inflation fell to 41-month low in April, dropping within the central bank’s comfort zone of less than 5 per cent and fuelling market hopes for more monetary easing to revive sagging economic growth. RBI is scheduled to announce mid-quarter review of monetary policy for 2013-14 on June 17.

[caption id=“attachment_785297” align=“alignleft” width=“380”] Inflation eased to 4.89 percent in April on account of decline in prices of food items. Reuters[/caption]

Inflation eased to 4.89 percent in April on account of decline in prices of food items, including fruits and vegetables. Based on the Wholesale Price Index (WPI), it stood at 5.96 per cent in March. In April, 2012, it was 7.50 percent. April recorded the lowest level of inflation since November, 2009 when it was 4.78 per cent.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

Encouraged by the declining trend in inflation, India’s Finance Ministry made a case for further rate cut by the RBI to boost sagging growth. “I think we need to look at statement made by RBI Governor during the last policy review where he had stated that RBI is closely monitoring inflation figures and if there is dramatic change in inflation figures then RBI will take that in to consideration during its next review,” Department of Economic Affairs Secretary Arvind Mayaram had said in New Delhi yesterday.

In order to accelerate economic growth, RBI earlier this month cut key interest rates by 0.25 percent. The central bank lowered the short-term lending (repo) rate to 7.25 percent from 7.50 per cent, lowest since May 2011 while retaining Cash Reserve Ratio for banks unchanged at 4 percent.

PTI