New Delhi, Nov 1: Finance Minister P Chidambaram today said the cut in interest rate by the United States was expected, but admitted that this could lead to arbitrage opportunities.
Mr Chidambaram told newspersons here that his understanding was that the RBI had factored in the credit policy Wednesday's interest rate cut by the U S Federal Reserve.
However, he said, it was too early to say what impact the U S move will have on the capital inflows and the economy in general.
"I think the (Central Bank) has factored it in the monetary policy. What impact it will have on capital inflows is too early to say," he said.
When asked whether it could give rise to arbitrage opportunities, Mr Chidambaram remarked "isn't that self- evident." The Federal Reserve cut U S interest rates by a quarter-percentage point to 4.5 per cent to buffer the economy from a housing downturn.
The rupee advanced for the eighth day on speculation of a cut in the benchmark interest rate by the U S Federal Reserve.