Reserve Bank of India (RBI) governor Raghuram Rajan is widely expected to cut interest rates by 25 basis points in the monetary policy review on September 29. The financial markets have already factored in a rate cut, with yield on the benchmark 10-year government bond dropping by five basis points last week.
Central banks across the world have been slashing rates or easing policy as commodity prices crash and global growth slows. Some economists expect that Rajan, too, will lower growth projection for FY16 from 7.6% to 7.4%. Rajan kept the market guessing last week when he said: "For any hints on what we will do in the upcoming policy statement, please read the guidance in our last policy statement." In his August policy, the governor had said that future cuts would be subject to inflation and playing out of uncertainties on inflation, monsoon and action of the US Federal Reserve.
Last week, although inflation was low, but Rajan attributed it to the base effect, and monsoon has been below normal. The US Fed chose to pause, but it has indicated a rate hike in 2015.
Central banks across the world have been slashing rates or easing policy as commodity prices crash and global growth slows. Some economists expect that Rajan, too, will lower growth projection for FY16 from 7.6% to 7.4%. Rajan kept the market guessing last week when he said: "For any hints on what we will do in the upcoming policy statement, please read the guidance in our last policy statement." In his August policy, the governor had said that future cuts would be subject to inflation and playing out of uncertainties on inflation, monsoon and action of the US Federal Reserve.
Last week, although inflation was low, but Rajan attributed it to the base effect, and monsoon has been below normal. The US Fed chose to pause, but it has indicated a rate hike in 2015.
