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    More rate cut? Wait, sub-3.5% interest rate to shrink economy

    Any further rate cuts beyond this threshold results in banks cutting back on lending and being forced to increase their safe asset holdings.

    Synopsis

    Policy rates cannot dip below a threshold, beyond which a rate cut could be counter-productive and lead to an economic contraction rather than stimulating it, according to a research report by SBI economists.They further said that lowering policy rates below 3.

    Mumbai: Policy rates cannot dip below a threshold, beyond which a rate cut could be counter-productive and lead to an economic contraction rather than stimulating it, according to a research report by SBI economists.They further said that lowering policy rates below 3.5% could be counterproductive and recommended an activist fiscal policy going forward. “We believe any further rate cuts will have the unintended impact on the economy. Instead, we
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    The Economic Times