Interest Rate: RBI governor hinted at not reducing interest rates, said- June inflation rate is expected to be 5%

Interest rate cut talks premature now, says RBI Governor : Reserve Bank of India Governor Shaktikanta Das has said that the country’s retail inflation is expected to be around 5 percent in the month of June. Along with this, he also said that it would not be right to talk about cutting interest rates until the inflation rate reaches the RBI’s target of 4 percent. He said that it is too early to talk about this right now. This statement of the Reserve Bank Governor can also be considered an indication of not cutting policy interest rates in the near future. Shaktikanta Das has said these things in an interview given to a private TV channel. He has also told that RBI is studying a ‘neutral’ interest rate these days.

It is too early to talk about rate cuts: Das

The Reserve Bank chief said in an interview aired on Thursday that India’s retail inflation rate (CPI headline inflation) is expected to be around 5 percent in the month of June, which is in line with the expectations of the Reserve Bank of India. But it is still far from its target of 4 percent. Therefore, talks about cutting interest rates cannot be started right now. Das said in an interview to a news channel that it would be premature to talk about changes in the monetary policy stance until the inflation rate reaches close to the RBI’s target of 4 percent.

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Interest rates did not decrease in 8 consecutive meetings of RBI

It is worth noting that the Reserve Bank did not make any change in the main policy rates for the eighth consecutive time in its monetary policy review meeting held last month. However, 2 out of 6 members of the Monetary Policy Committee voted in favor of reducing interest rates. But Governor Shaktikanta Das believes that at present the RBI should focus its entire attention on achieving its goal of controlling inflation. Meanwhile, according to a poll of economists conducted by news agency Reuters, the retail inflation rate in the country is expected to increase marginally to 4.8 percent in June. This rate was 4.75 percent in May. The official figures of retail inflation rate in the country are to be released on Friday.

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What will be RBI’s ‘neutral’ interest rate?

Shaktikanta Das has also said that the pace of development in the country remains strong and it is quite possible to achieve an economic growth rate of 7.2 percent during the current financial year ending in March 2025. Not only this, he has also expressed the hope that the Indian economy is moving towards 8 percent growth rate and he is very “optimistic” about the country’s economic prospects. The RBI governor said that the Reserve Bank is studying a neutral interest rate. According to Das, this neutral interest rate will be applicable when the RBI achieves its target of controlling inflation and the country’s growth rate is at its highest level. Shaktikanta Das said that RBI’s estimate about this neutral interest rate is likely to be released in the next 1-2 months.