Millennium Post

Das hints at rate cut; RBI presser turns a whimper

Mumbai: The RBI on Monday hinted at a rate cut but stopped short of a decision, belying market expectations at a hurriedly called presser even as it announced some liquidity enhancing measures to contain the economic fallout from the coronavirus. But Governor Shaktikanta Das was quick to assure that the Reserve Bank has "enough policy tools and stands ready to take any measures" needed to help the economy tide over the impact of the coronavirus pandemic.

To a question why the rates were left unchanged at 5.15 per cent, Das said, "according to the prevailing law, the rate cut call has to be taken through the monetary policy committee, but I don't rule out anything. Depending on the evolving situation, we will decide on the timing of our action."

In two liquidity enhancing measures, Das announced another round of USD 2 billion dollar-rupee swap on March 23, and in another measure he said the RBI will continue to conduct the long-term repo operations (LTROs) of up to Rs 1 lakh crore as and when the market needs it. On March 16, the RBI conducted the first dollar-swap for USD 2 billion under which the central bank buys rupee from the market by selling the dollars. On the LTROs, it has already conducted four rounds worth Rs 1 lakh crore operations since February 14, after announcing it at the February 6 policy review.

Given the short notice for the press meet amidst the continuing mayhem in the market and the rising call for rates cuts to the tune of 65 bps by June including a pre-term cut of 25 bps by some analysts, the meeting spawned too much expectation of a rate cut. Had he announced a rate cut, it would have been the first inter-meeting rate reduction since the monetary policy committee was instituted in

February 2016.

The hurriedly called presser comes amidst widespread call for an inter-meeting rate cut following similar steps by the world's leading central banks like the US Fed which in a span of 10 days has cut the policy rates to near zero levels.

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