RBI sticks to its guns: We’ll have to wait longer for a policy pivot
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Subscribe to enjoy similar stories. On Wednesday, Reserve Bank of India (RBI) Governor Shaktikanta Das stayed true to his words.
In contrast to his global peers (read many large central banks), Das stuck to his guns, keeping policy rates unchanged, while showing flexibility—changing the monetary-policy stance to “neutral" from the erstwhile “focused on withdrawal of accommodation." Rightly so! Central bank governors are not in the game of follow-the-leader, heedless of domestic compulsions. As Das quipped in a recent interview to CNBC’s Tanvir Gill in Singapore, late September: “This seems to be rate-cut season." Adding, “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 [and] growth dynamics and the outlook.
We will not be influenced by how much of a rate cut they are doing, whether it is 25 or 50 [basis points] or how often and what is the frequency of their rate cuts." Das was referring to the prospect of further rate cuts by the US Federal Reserve, and, possibly, a clamour from domestic markets to follow suit. Yes, major central banks, including the European Central Bank, Bank of England, Swiss National Bank and, most recently, the People’s Bank of China have eased monetary policy in recent months.
But is that reason enough for RBI to do so? No, according to the newly-constituted Monetary Policy Committee (MPC) that met over the last three days (7-9 October). The decision to mark time was widely expected—even if market aficionados, as is their wont, put forth a host of reasons why RBI should cut rates.
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