External member of the Reserve Bank of India’s Monetary Policy Committee (MPC), Jayanth Varma, has suggested that India is nearing a phase where an interest rate cut may be essential to prevent an excessive real interest rate. He emphasized the need for a restrictive monetary policy to bring down inflation to four percent but expressed concerns about the “withdrawal of accommodation” stance adopted by other MPC members. Varma pointed out that the MPC might face a choice between delaying a necessary cut or cutting rates against a stance calling for further withdrawal of accommodation. The recent signals from the US Federal Reserve indicating potential rate cuts have added complexity to the decision-making process.
RBI MPC Member Signals Potential Interest Rate Cut in India Amid Global Developments
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