Fed's September rate cut unlikely to alter RBI stance'

RAJEEV RADHAKRISHNAN, chief investment officer (fixed income) at SBI Mutual Fund, remains optimistic about the demand-supply dynamics, citing sustained overseas demand as a key factor. In an email exchange with Abhishek Kumar, Radhakrishnan notes that global central banks' potential policy easing could further bolster demand. However, he cautions that portfolio flows into India may be vulnerable if the economic slowdown expands beyond the US, potentially impacting investor sentiment. Edited excerpts:

- RAJEEV RADHAKRISHNAN

With the Reserve Bank of India (RBI) emphasising the 4 per cent inflation target, are rate cuts still some quarters away? Could a US Federal Reserve (Fed) rate cut in September affect the RBI's stance?

The timing of rate cuts in India will depend on the evolution of the country's growth and inflation outlook. While economic growth remains fairly resilient, Consumer Price Index inflation is expected to be slightly above the 4 per cent target. Therefore, the Fed's actions in September are unlikely to influence the RBI's stance.

How do you view the latest US economic data? Will a slowdown in the US have any spillover effect on the Indian economy?

The latest data and Fed commentary indicate that the impact of past rate hikes is starting to affect economic activity, even as inflation remains slightly above the target. The Fed is likely to ease policy rates over the coming months. However, markets often overreact to individual data releases.