India’s central bank governor says it’s too early for rate cuts

India’s inflation remains above the central bank’s target, and it’s premature to discuss interest rate cuts yet, governor Shaktikanta Das said. 

Inflation figures for June, due to be published on Friday (Jul 12), will likely be close to 5 per cent, exceeding the Reserve Bank of India’s target of 4 per cent, Das said in an interview to CNBC-TV18 channel on Thursday (Jul 11).

“It’s too early to talk about interest rate cuts,” he said. “We are some distance away from our inflation target.”

The RBI has kept its policy rate unchanged at 6.5 per cent for more than a year now although economists are betting the central bank is getting close to pivoting as inflation eases and the Federal Reserve prepares to ease.  Two of the RBI’s six members on the monetary policy committee voted last month to cut interest rates, arguing that too tight policy may impede economic growth.

Das said growth in the first quarter of the fiscal year that began in March was strong, and the central bank’s full-year projection of 7.2 per cent looks “achievable.” Urban demand is stable and rural demand is picking up, he said. BLOOMBERG