RBI not discussing rate cuts yet, says Governor Shaktikanta Das

India’s central bank won’t consider interest rate cuts unless inflation settles firmly around the 4% target, with policymakers not even discussing the topic yet, Governor Shaktikanta Das said. 

While price gains have moderated, “unless we see clear evidence that inflation is going to sustain at that level, it will be premature to talk about rate cuts,” Das told Bloomberg Television’s Haslinda Amin in an interview on the sidelines of the World Economic Forum in Davos Thursday. “The topic of rate cuts is not even under discussion,” he said.

The Reserve Bank of India has kept rates unchanged for five straight policy meetings, while sticking to a relatively hawkish stance as inflation hovers above the target. Economists are projecting the central bank will begin cutting interest rates this year after the Federal Reserve starts easing. 

When asked about Fed rate cuts, Das said markets “all over are running ahead of central banks and that should not happen.” He said rate cuts in India will depend on domestic factors, and reiterated the RBI’s policy is to be “actively disinflationary.” 

Inflation in India accelerated to a four-month high in December, largely due to volatile food prices. Stripping out food and fuel costs, the core measure slid below 4% for the first time in almost four years, raising expectations of rate cuts.

The RBI targets headline inflation, which has “come within our target range of 2% to 6%,” the governor said. “But our target being 4%, we are steadily moving towards that.”

Economic growth will likely touch 7% in the next fiscal year while inflation will average around 4.5%, Das said, repeating comments he made in a speech Wednesday. That would put the economy on track to post growth of around 7% or more for four consecutive years, he said.