There's no real reason and hurry for RBI to cut rates: Neeraj Gambhir, Axis Bank
RBI, said Neeraj Gambhir, head-treasury and markets at Axis Bank. In an interview with Bhaskar Dutta, he said the rupee may appreciate a bit but the central bank may intervene with competitiveness in mind. Edited excerpts:
The domestic narrative is not how much more the RBI will raise rates but when the rate cuts will start. Which camp are you in?
What is creating the problem is the volatility in food prices and some of the other commodities.
Our forecast for average inflation in FY25 is roughly 4.8%. You would see an 80-90 basis point average reduction in inflation next year. We could see some periods when inflation also goes closer to 4% or less than 4% during a part of the year.
On an average basis, we will still not be at a level of inflation where the Reserve Bank can call it a victory. Therefore, there is a question mark whether we will have a rate cut this year.
What about the sharp decline in core inflation?
The RBI can potentially draw some comfort from core inflation and say that when core inflation is good, they can be a bit more relaxed but until the headline inflation comes to the level that it wants to, it is very difficult to say that they have won the war.
Even after cutting rates by 125 bps, the Fed will be at 4%, which is a fairly high level of interest rate for that economy.
India hasn't gone through that extreme case of rate hiking. We have reasonably good growth, and the expectation of growth next year is still fairly decent. There is no real reason and hurry to cut rates.
Read more on economictimes.indiatimes.com
