Despite crude price running up in recent months and resulting in an uptick in inflation, Finance Minister Arun Jaitley doesn’t see lower interest rates as a thing of the past.
In an exclusive interview with News18 Network, Jaitley said that the price of crude oil is an unpredictable factor and that conventional wisdom doesn’t do much good when it comes to predicting where it will go.
“One thing I see is that on oil price, what will happen in two months from today, not to go by the conventional wisdom of what is told to you. Because nobody told me about the decrease of oil price that it will go down to USD 28, and nobody told me it will come back to USD 70,” Jaitley said.
When asked whether it was safe to assume that lower interest rates were at least out of the question in the near term, Jaitley said that these matters will be decided upon by banks.
Crude oil prices have been on the rise for over 7 months now, up from around USD 44 levels in June 2017 to over USD 68 at the end of January. The primary reason for this rise was oil cartel OPEC’s decision to cut production to tackle a supply glut.
As a result of this rise in crude oil prices, coupled with a rise in prices of vegetables, India’s consumer price index (CPI) inflation rose from just under 2 percent in June 2017 to a 17-month high of 5.2 percent in December.
The Reserve Bank of India, in its last policy review, warned about inflation remaining elevated, causing numerous market participants to factor in a rate hike sooner rather than later. Economists said they don’t see the country returning to a low interest rate regime any time soon.moneycontrol