'We expect deposit rates to moderate after this rate cut'

Reserve Bank of India (RBI) Governor Sanjay Malhotra, and Deputy Governors S C Murmu, Poonam Gupta, T Rabi Sankar, and Swaminathan J on Friday addressed issues during the post-policy media interaction.

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Edited excerpts:Is there more room for the Monetary Policy Committee (MPC) to support growth?

Malhotra: On whether there is additional policy space, we are at “neutral” now. As I said in my statement, inflation is very benign. Excluding food, which has been volatile, the core inflation rate has stayed at 3-3.5 per cent over the past two years. If you exclude gold and silver, our expectation is that inflation will remain very benign.

Discussing whether this opens the door for further rate cuts would be speculative. For me, what matters now is ensuring monetary-policy transmission after the cut of 25 basis points. With prices expected to stay benign, it is important that the benefits first flow to the real economy. We will then evaluate how inflation and growth-inflation dynamics evolve, and take decisions policy by policy.

What is the RBI’s approach to the exchange rate?

Malhotra: On the rupee, our stated policy has been to let the market determine the rate. We do not target any levels or bands. In the long run, markets are efficient. In February, the rupee had weakened to nearly 88 against the dollar, but within three months it strengthened to below 84. Such fluctuations and volatility can and do occur. Our role is to curb abnormal or excessive volatility, and that remains our approach.