Moody's arm says RBI may tighten interest rates before Jul review
Friday, Jun 20
NEW DELHI - The Reserve Bank of India is likely to further tighten
interest rates before its next quarterly review of the policy on Jul
29 after the headline inflation rate soared to a 13-year-high of
11.05%, Moody's Economy.com said today.
"The RBI looks set to further tighten monetary policy. There is a
good chance that the central bank will not wait until the next formal
review, which is scheduled for July," the Moody's arm said in a
release.
On Jun 11, the RBI had hiked repo rate by 25 basis points to 8% to
curb inflationary expectations. Prior to the move, the central bank
was primarily relying on cash reserve ratio to suck out liquidity and
tame inflationary expectations.
It steadily raised banks' CRR by 200 bps since Apr 2007 with the
last one coming on Apr 29.
The central bank has projected inflation for 2008-09 at 5.5%.
The government has also taken a series of measures, including duty
cuts, but they have not had any impact so far to rein in prices.
However, the Moody's economic think-tank arm maintains that
despite moderation in household consumption and business investment in
2008-09 following high inflation and tight monetary stance, Indian
economy will grow by 7.6%.
The Indian economy grew 9.0% in the 2007-08.
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