The Reserve Bank of India (RBI) on Tuesday raised the key policy rate by 25 bps from 7.5% to 7.75% while lowering the MSF rate (under which scheduled banks could borrow up to 1 % of their respective Net Demand and time Liabilities funds overnight from RBI against approved government securities) to 8.75%.
After the RBI's policy announcement, senior editors asked "Is this a hawkish, dovish or neutral policy?" RBI governor Raghuram Rajan said "What we have said is that we have set interest rates at a level that we are comfortable with, given our expectation of how things will evolve. If data come in — which move us either towards a significantly higher inflation than what we expect or a significantly lower growth — we will take appropriate steps. What I am saying is that, at this point, we feel comfortable given our projections." "The central bank may have done enough on rate hikes but will need to monitor the economy", "I won't say that we have a set of rate hikes in mind," Rajan said. "We think we have done enough given what we know about the economy to wait and watch and see what happens."
The editors also asked "Do you expect banks to ease rates in response?" He replied "It's for them to take decisions."
Rajan added the Indian rupee would be considered to have stabilised only when oil demand has returned to markets, while adding the special swap window currently provided by the central bank would be tapered gradually.
【News source】
Short-term cost of funds down, it's for banks to decide on rate cuts: Raghuram Rajan
RBI may have done enough on rate hikes: Raghuram Rajan
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