Indian Finmin Favours Interest Rate Cut

India’s Finance Minister Arun Jaitley favors a cut in interest rates to trigger demand in the construction sector, a newspaper report said on Saturday, but the central bank has signal it will not ease policy until it is confident of lower inflation.

In May, Prime Minister Modi was elected on promises that his government would create jobs and rejuvenate the Indian economy, but experts were disappointed by Jaitley’s first budget and a lack of early progress on fixing structural economic problems.

“Currently, interest rates are a disincentive. Now that inflation seems to be stabilizing somewhat, the time seems to have come to moderate the interest rates,” Jaitley said in an interview with the Times of India.

 
Last month, the Reserve Bank of India, sent a strong signal that it would refrain from cutting interest rates until the central bank was confident that consumer inflation can be cut to a target of 6 percent by January 2016.

India’s retail inflation eased for a second straight month in September, but the risks of price shocks from weak monsoon rains and oil are expected to prevent the central bank from cutting interest rates soon.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza