India’s central bank Governor Shaktikanta Das said an interest rate cut at this stage would be “very premature” and risky.
While inflation is expected to moderate, there are “significant risks” to the outlook, Das told Bloomberg News Deputy Editor-in-Chief Reto Gregori at the India Credit Forum in Mumbai on Friday. He added that the central bank wasn’t “behind the curve” and needed to be “vigilant” on inflation.
The Reserve Bank of India has kept its key interest rate unchanged for almost two years, although signaled last week it may be preparing to ease after changing its policy stance to neutral. That comes as central banks around the world follow the US Federal Reserve in reducing interest rates, with Thailand the latest to surprise with a cut this week.
The timing of policy easing in India remains uncertain. While most economists had predicted the RBI would begin lowering rates in December, this week’s hotter-than-expected inflation data prompted economists to push out their rate-cut forecasts to next year.
Das has repeatedly said the RBI wants to see inflation settling around the 4% target level on a durable basis before considering a cut. Deputy Governor Michael Patra has indicated that won’t happen until the fiscal year that starts April 1.
Das’s comments on Friday were his first public statements on inflation since the worse-than-expected data, and comes against the backdrop of recent evidence showing India’s world-beating growth is starting to taper off and company profits are weakening.
The RBI is more bullish about growth prospects compared with the market consensus and even the government. Das last week kept the central bank’s forecast for the current fiscal year unchanged at 7.2%, while the government’s own projection is a more subdued 6.5%-7%.
