RBI: room to cut rates may emerge once inflation comes down

MUMBAI Tue Jan 28, 2014 1:04pm IST

A vendor waits for customers at her shop selling vegetables in Dharavi, one of Asia's largest slums, in Mumbai January 24, 2014. REUTERS/Mansi Thapliyal/Files

A vendor waits for customers at her shop selling vegetables in Dharavi, one of Asia's largest slums, in Mumbai January 24, 2014.

Credit: Reuters/Mansi Thapliyal/Files

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MUMBAI (Reuters) - The Reserve Bank of India will have room to cut interest rates when inflation comes down but whether or not the RBI actually cuts the rate is a bit too premature to say, Governor Raghuram Rajan said on Tuesday after hiking rates in a surprise move.

Rajan also said that it was necessary to make the statutory liquidity ratio (SLR) a liquidity function rather than a funding function, but added that he does not see the need to cut the SLR immediately.

Earlier in the day, the RBI unexpectedly raised its policy interest rate by 25 basis points but said that if consumer price inflation eases as projected it does not foresee further near-term tightening.

(Reporting by Suvashree Dey Choudhury and Mumbai Treasury Team; Writing by Swati Bhat; Editing by Supriya Kurane)

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