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RBI to take a call on rates tomorrow
The Reserve Bank of India may have to take a tough call on whether to cut key rates or maintain the status quo when it reviews its monetary policy on Tuesday, with inflation being at afiveyear low even as excess liquidity problems persist.
RBI governor YV Reddy has a difficult role to perform as peaking interest rates have begun impacting the high growth momentum while the liquidity problem is being aggravated by surging forex inflows. While some bankers and economists expect a marginal cut in key short term rates, others feel the RBI might not do so in the face of inflation ary expections looming large due to surging global oil prices.
With interest rates having peaked and inflationary pressures still persisting the RBI is not expected to tinker with the rates they said. The apex bank might, how ever reduce the difference between the repo and reverse repo rate, even as it signals a stable interest rate regime whilt it would be a toss up as fas as a cash reserve ratio hike was concerned, they said “There are no domestic compulsions calling for any change in monetary policy.
I expect nothing dramatic, the tight monetary policy initiated a year back will continue,” Cricsil chief economist Subir Gokarn said. “A CRR hike is a possibility, but there is just an outside chance that the RBI might not effect it this time round,” Yes Bank’s chief economist Shubhada Rao said. Private sector Kotak Mahindra Bank managing director Uday Kotak said he expected” a flat and benign policy” in the light of the steps taken by Sebi for checking inflows into the country through participatory notes.