The Telegraph
Since 1st March, 1999
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Fed rate cut fails to impress RBI

Mumbai, June 26: US Federal Reserve’s decision to cut interest rates by 25 basis points to 1 per cent will not affect the rate regime in India, according to the Reserve Bank of India.

Playing down the possible impact of the US move, RBI deputy governor Rakesh Mohan today categorically ruled out a cut in the repo rate in the near future.

The US Fed rate cut had triggered expectations in some quarters here that RBI may bring down the short-term benchmark repo rate.

Speaking to reporters at a function to launch the multi-banking system for collection of central excise duties, Mohan said RBI is not taking any cue from the US move and that it will not have any impact on the monetary conditions in India.

According to Mohan, RBI’s financial market committee met today to take stock of the Fed action and it saw no reason to change the central bank’s policy of a soft bias in interest rates.

On being asked about the possibility of a cut in the repo rate, he said, “there will be no cut for quite some time since neither the inflationary trend nor monsoon situations are still clear.”

Referring to the liquidity situation , he said, “It is quite easy at present. We are watching it carefully and will take whatever action is necessary.”

When asked on the possibility of an increase in the notified amount of treasury bills to manage money market liquidity, Mohan said, “that is possible”.

“We are watching liquidity on a daily basis and open market operations and extra government borrowings will also be considered,” he said.

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