Rate Cuts Not Off the Table Yet? What an MPC Member Just Revealed May Surprise You

The Reserve Bank of India's Monetary Policy Committee (MPC) member Saugata Bhattacharya said on Wednesday that there is room for borrowing costs to come down, despite a shift in stance in the last policy which highlighted a tightening bias.

What Did Bhattacharya Say?

According to Saugata Bhattacharya, the member of the central bank's MPC, the policy change from 'accomodative' to 'neutral' in the June 6 policy does not "preclude further rate cuts. Absolutely not," Saugata Bhattacharya, was cited by a Bloomberg report on Wednesday.

"If inflation allows a further cut in the policy repo rate, so be it," he added.

Additionally, he pointed out that a good monsoon as well as easing vegetable prices support a benign inflation outlook, with global food prices contained and edible oil prices declining.

Saugata Bhattacharya was the only rate-setter who had voted for a quarter-point cut in the last monetary policy decision, the report added, where RBI delivered a bigger-than-expected interest rate cut along with a cash boost for banks to spur growth.

According to Bhattacharya, the immediate liquidity withdrawal was necessary because overnight rates had fallen below the floor of the RBI’s rate corridor, warranting calibration.

"Managing liquidity down to the last rupee is always a very difficult proposition," due to several unpredictable and constantly evolving factors like government cash balances, currency in circulation, global capital flows, and RBI’s market interventions, he added.

What Did Sanjay Malhotra Say About This?

The RBI Governor, Sanjay Malhotra made similar remarks last week as he sought to clarify the central bank’s recent policy moves.

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