Growing Support For Interest Rate Cut Within RBI's Rate-Setting Panel
The RBI has been holding the key interest rate at 6.5% since February 2023.
Support for interest rate cuts is growing within the Reserve Bank of India's rate-setting panel, with members Ashima Goyal and Jayanth R Varma voting for a cut.
The previous Monetary Policy Statement from April 19 had also voted to keep the policy repo rate unchanged at 6.5%. The ratio of votes for the resolution was 5:1 against the current 4:2 announced at Friday's conference.
Varma, who has been advocating for a change in repo rate for the past few sessions, has now been joined by Goyal, who had previously voted 'yes' to keeping the repo rate unchanged.
The Monetary Policy Statement, 2024-25 Resolution released by the central bank declared that Goyal and Varma voted to reduce the policy repo rate by 25 basis points.
Shashanka Bhide, Rajiv Ranjan, Michael Debabrata Patra and Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50, according to the statement.
Jayanth Varma, the other member who has voted for the rate cut, had previously made a case for lowering the benchmark interest rate by 25 basis points in the February 2024 and December 2023 MPC meetings.
Two members advocating rate cut come close on the heels of some central banks from advanced economies like Switzerland, Sweden, Canada and the Euro area that have begun their rate-easing cycle during 2024. Market expectations of rate cut by the US Federal Reserve, which was higher earlier, have moderated subsequently.
Unveiling the monetary policy, Das said there is a view that in matters of monetary policy, the RBI is guided by the principle of "follow the Fed".
"I would like to unambiguously state that while we do keep a watch on whether clouds are building up or clearing out in the distant horizon, we play the game according to the local weather and pitch conditions.
"In other words, while we do consider the impact of monetary policy in advanced economies on Indian markets, our actions are primarily determined by domestic growth-inflation conditions and the outlook," Das said.
The RBI has been holding the key interest rate at 6.5% since February 2023.
