New Delhi: Falling inflation and declining global crude oil prices have created space for the Reserve Bank of India to cut interest rates, S&P Global Ratings said on Tuesday.
The RBI is scheduled to announce its sixth bi-monthly policy review for the fiscal on 7 February. It would be the first Monetary Policy Committee meeting under RBI Governor Shaktikanta Das, who took charge in December 2018 following sudden exit of Urjit Patel.
S&P Global Ratings Economist Vishrut Rana said inflation remains under control and near the low end of the target band, following strong food output, and easing crude oil prices, that have fallen about 20 percent from their October highs.
"These two factors mean that the Reserve Bank of India has some policy space to move its interest rate settings downward at least in the near term," Rana said.
In its December monetary policy review, the RBI had kept interest rates unchanged but held out a promise to cut them if the upside risks to the inflation do not materialise.
The continued decline in food and fuel prices pulled down retail inflation to an 18-month low of 2.19 percent and WPI inflation to an 8-month low of 3.80 percent in December 2018.
The government has mandated the RBI to contain retail (CPI) inflation at 4 percent (+/- 2 percent).
Brent crude which had breached USD 80 a barrel mark is now hovering around $63 a barrel.
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Updated Date: Feb 05, 2019 13:47:55 IST