Lower policy rate appropriate at current juncture: Governor

Focus Shifts To Growth

- SACHIN KUMAR

A LOWER POLICY rate is more appropriate at this time, given that inflation is expected to align with the Reserve Bank of India (RBI)'s target, governor Sanjay Malhotra said in the minutes of the latest monetary policy committee (MPC) meeting.

Budget proposals on agriculture and the government's commitment to fiscal consolidation are positive for price stability and would help anchor inflation expectations over the medium term, he said.

"Given the macroeconomic outlook when inflation is expected to align with the target, and recognising that monetary policy is forward looking, I view a lower policy rate to be more appropriate at the current juncture," Malhotra said. "The food inflation outlook is turning decisively positive."

The governor, along with five other members of the MPC, had voted for a 25-basis-point reduction in the short-term lending rate (repo) to 6.25% on February 7, the first such cut in nearly five years. The MPC includes three RBI members and three external members.