RBI unlikely to signal hike in rates: Pronab Sen

RBI unlikely to signal hike in rates: Pronab Sen
The Economic Times, October 23, 2009, Page 10

PTI & Our Bureau NEW DELHI / HYDERABAD

CHIEF Statistician Pronab Sen on Thursday said that the Reserve Bank is unlikely to signal hike in interest rates in its forthcoming monetary review next week despite inflationary pressures. When asked whether the RBI would review policy rates in view of inflationary pressures, he replied in the negative.

The RBI would announce its quarterly policy on October 27.

Inflation is rising mainly due to base effect, Sen said at a function organised by think-tank Economist Intelligence Unit (EIU). He added that the effect of drought has already been factored into prices so there would not be further acceleration in food prices, though inflation is likely to remain high in the coming months. “I don’t think the rate of increase (of food prices) is going to accelerate...(though) levels will remain high,” he said.

Inflation rose to 1.21% for the week ended October 10 as prices of major food items firmed up further. The wholesale price-based inflation stood at 0.92% in the previous week. Sen further said that there is no evidence of inflationary pressures on non-agricultural items.

Meanwhile, in Hyderabad, State Bank of India, the country’s largest bank, chairman O P Bhatt said interest rates will continue to be stable even if credit-off take picks up in the second half of the current fiscal. “I do not see any hardening of interest rates even if credit off-take picks up. Neither do I see any further softening of interest rates which have already bottomedout,” he said on the sidelines of a summit.

According to him, deposit accretion is growing at faster clip than what the RBI had expected. Even today, banks are parking surplus of over Rs 1 lakh crore with the central under the reverse-repo facility and I do not think interest rates would go up,” he said.

At present, CRR stands at 5%, while the repo rate (the rate at which banks borrow from RBI) is at 4.75% and reverse repo (the rate at which RBI borrows money from banks) stands at 3.25%.