C Rangarajan Raises the Hope, Interest Rates likely to cut by 0.25 per cent

Aug 05, 2015: Reserve Bank Of India (RBI) took the decision of keeping the interest rates to be unchanged yesterday. The primary factor behind the decision was the inflation. However, C Rangarajan indicated that the RBI may cut the rate by 0.25 basis points if monsoon comes out to be good for the next month. He is the former RBI Governor and former chairman of the Prime Minister's Economic Advisory Council.He said that RBI might have been "hesitant" in making any policy change in the middle of the monsoon.

Rangarajan said,"The RBI has taken a cautious approach. The monsoon picture is still not clear. If the monsoon picks up and there is a clear picture, then there may be a time at which the central bank may want to make any change in the policy rate. That will depend on how the monsoon behaves".


Rate Cut


"Going ahead if the monsoon turns out to be good which would be understood in two months time, then a 0.25 percent rate cut is possible by the end of September," he added.According to him if monsoon goes well l then food inflation is not going to be a problem.

Rainfall has been strong in June with a below-par show in July.However, on the net, the monsoon is near average so far. In the view of the Met Department, rainfall over the country during the August to September period is likely to be 84 percent of LPA(long period average). While the model error has been plus or minus 8 percent that indicates it could be deficient.

Central Bank will implement the fourth bi-monthly policy of this fiscal on September 29 .Now, it will depend on what Monsoon has to offer.