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Governor comments temper policy rate cut hope

Governor comments temper policy rate cut hope

Expectation that Reserve Bank of India (RBI) would reduce policy rates during the monetary policy review on January 29 was tempered by the recent remarks of Governor D Subbarao.

Subbarao recently remarked that reducing inflation is the priority of the central bank and will always be. Only then can the poor be given relief, he added.

He said this while addressing a crowd of villagers and state government officials at Lalpur Karauta village in Barabanki district during an RBI outreach program.

Market analysts and corporates were expecting the central bank to reduce policy rate in order to revive economic growth on January 29. But this comment tempered the expectation.

In the last few years, inflation has increased a lot. All items, especially, food and clothes have become very expensive.

Inflation has affected everybody, but it has hurt poor the most, Subbarao said. “We have been able to control inflation during the last two years but I recognise the fact that it continues to be high,” he remarked.

With the headline inflation dropping to a three-year low, according to data released a few days ago, expectations of a rate cut in the policy review by RBI has heightened.

Meanwhile, he said Uttar Pradesh had a very low Credit Deposit Ratio of about 47 percent. He said that while deposits were mobilised in the state they were deployed outside UP. The governor said that a state like UP should have a better CD ratio.

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