Further reduction in repo rate by RBI will be based on lower inflation

Mumbai, Ta. 25 November 2020, Wednesday

The Reserve Bank of India has slashed interest rates significantly in recent days and the next cuts will depend on how much inflation eases. At present, inflation is high due to supply shortages caused by the Corona, RBI sources said.

The share of food in the country's inflation is very high and food prices are expected to come down by December. Bringing down prices is not easy in Corona’s time.

The next meeting of the RBI's Monetary Policy Committee is scheduled for December. In the last meeting, the committee avoided lowering the repo rate as retail inflation remained higher than the Reserve Bank's target. Given this fact, the government was forced to release more stimuli.

The economic situation in the country is not as bad as it used to be. Out of the 8 high frequency indicators that provide the criteria for economic dynamics, 12 indices indicate that the situation is returning to normal.

The Reserve Bank has cut the repo rate by 114 basis points this year. The cuts have not only boosted the economy, but also poured billions of dollars into the country's banking system.