Ahead of record low inflation rate, RBI may cut the rates on interest by August 2. Past 3 months’ inflation encouraged RBI to take a step.
Significant fall in inflation will make loans affordable, especially for middle-class Indians. This fiscal started in an outstanding way inspiring better economy of the nation. Government’s decision on demonetisation which led lower food prices made the inflation under control and it is the perfect time for that.
As per the RBI’s target, there is 4 percent figure of past eight months amid weak consumer spending, led to the lower inflation rate. Inflation eased to its slowest pace in more than five years in June.
Best monsoon, controllable crude prices, smart utilisation and a stronger INR (in trade) all shared signal for India’s much-anticipated inflation scale.
Out of 56, 40 of nation’s top economy expert hinted that RBI may take this step by July 24-27, cutting its repo rate by a quarter percentage point to 6.00 per cent on Wednesday. Two respondents said the central bank would cut the rate by 50 basis points.
No only this, RBI is also planning to trim the reverse repo by an equal measure of 5.75 percent. It was October 2016 when RBI cut its key interest rate. On another side, once RBI trims the size, it will stand for an atleast 2019-time period because economic growth is set to accelerate. Indian stocks are trading at a record high, partly in anticipation of that.
However, it is also expected that country’s economy may soar to 7.3 percent by this fiscal year, reclaiming its position as the fastest growing major global economy. GST is the key factor behind this, according to many economists. That could push up core inflation, which has remained above 4 per cent for years and has been a key concern for the RBI.
Inflation is forecast to rise to 4.7 per cent next year.