The deputy governor of the Reserve Bank of India (RBI), Mr. Subir Gokarn has said that the central bank has some room for reducing its key policy rates following moderation of core inflation and a fall in global crude oil prices.
The central bank had earlier indicated that its stand on monetary policy will depend on the level of oil prices in the international markets and the domestic economic growth rates. Mr. Gokarn said that the liquidity situation is comfortable in the economy citing a fall in bank's borrowing from the RBI.
"Two factors that suggest there is room for a rate cut is the slowdown in growth and the fall in oil prices," Gokarn said.
He also hinted that the central bank might consider buying bonds thorough an open market operation if the liquidity situation gets tough in the economy. He was speaking on the sidelines of an investment seminar.
He also said that that the weaker GDP growth rate will impact the central bank's projection of GDP growth for the 2012/13 fiscal year. The country's GDP growth has fallen to 5.3 per cent in the fourth quarter, which is its lowest level in nine years.
The RBI is set to announce its mid-quarter policy review on June 18.