Reserve Bank may reduce interest rates again, may be cut by 0.25 percent

• Corona crisis caused heavy losses to the economy

• Meanwhile, retail inflation has also increased significantly in the country.

• Due to this, interest rates can be cut again.

The Reserve Bank of India can cut interest rates once again to save the economy facing the Corona crisis. According to experts, in the next monetary policy review, the RBI may cut the policy rate repo further by 0.25 per cent.

Significantly, the three-day meeting of the Monetary Policy Committee (MPC), headed by the Governor of RBI, is to begin from August 4 and an announcement will be made on August 6.

The Reserve Bank is constantly taking steps to limit the damage to the economy and the impact of lockdown due to the outbreak of Kovid-19 epidemic. Prior to this, the meeting of MPC was held in March and May, in which the policy repo rates were cut by a total of 1.15 percent.

Retail inflation has increased

Due to the recent rise in prices of food items, especially meat, fish, cereals and pulses, retail inflation based on the Consumer Price Index has risen to 6.09 in June. The Reserve Bank itself has said that the comfort level of inflation is only 4 percent (it can be 2 percent plus or minus). That is, inflation is now outside the comfort zone of the Reserve Bank.

Why hope

According to news agency PTI, Principal Economist of ICRA, Aditi Nair said, “We are expecting a 0.25 percent reduction in the repo rate and 0.35 percent in the reverse repo rate.”

Nair said, “Although the retail inflation has exceeded the MPC’s target of two-six per cent, it is expected to come back within this range by August 2020.”

Expressing similar opinion, Union Bank of India managing director and CEO Rajkiran Rai said, “There is a possibility of 0.25 per cent cut or they can keep the rate unchanged.”