Finance ministry policy group to push for rate cut

Finance ministry policy group to push for rate cut

The finance ministry’s monetary policy group, meeting on Wednesday, is pushing for an interest rate cut to boost investment and economic growth.

Finance Minister Arun Jaitley has already made out a case for such a cut, citing easing inflation and a possible rise in oil prices.

Sources said the monetary policy group, comprising finance ministry officials and economists, has prepared a report for the RBI. The report recommends easing of interest rates, they said.

Contrary to the monetary policy group, the monetary policy committee or MPC favours raising interest rates by at least 0.25%, keeping in view possible inflation in the monsoon season.

As a rationale, its members have cited the usual increase in prices of food items, especially vegetables and fruit, in the months ahead.

The MPC has done four monetary policy reviews since it was set up last year. It has lowered the policy interest rates only once, and that too, by just 0.25%.
DH News Service

Excess cash
Economists polled by various agencies see little scope for the RBI to tinker with interest rates, since $60 billion in excess liquidity is sloshing around in the system. Lowering interest rates in such a situation could fuel inflation, they said.

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