RBI to review rates in its next policy
The Financial Express, January 1, 2010, Page 13
Reuters, Hyderabad
The Reserve Bank of India (RBI) will review interest rates at its next policy review scheduled for January 29 and not before, a deputy RBI governor said on Thursday.
“Wait for 29th. It can’t be speculated. If it has to happen, it will happen on 29th. You will have to wait for that,” said KC Chakrabarty, a deputy governor of the RBI, when asked whether and when the central bank would adjust rates.
India and South Korea are widely expected to be among the first Group of 20 nations to follow Australia and raise interest rates as they recover from the global slowdown.
Some economists expect inflation in India to reach 8% by the end of March, above the RBI’s comfort level. The RBI can adjust monetary policy at any time, and has changed interest rates outside of its scheduled quarterly policy reviews on numerous occasions.
Of the six cuts in the repo rate between October 2008 and April, only the last reduction came at a policy review. Chakrabarty became one of the four deputy RBI governors in June, although another deputy heads RBI’s monetary policy department.
Chakrabarty, speaking to reporters on the sidelines of an event in the southern city of Hyderabad, also said the RBI is not worried about yields on the 10-year government bond , which traded at 7.66% on Thursday and last week touched 7.75%, the highest since November 2008.
India is borrowing a record Rs 4.51 lakh crore ($97 billion) this year, and high rates add to the government’s borrowing cost as it manages a fiscal deficit running at 6.8% of GDP, a 16-year highhave not heated up that they need to cool down. Seven to 8 % yield on 10-year is not uncomfortable, dangerous nor worrisome. It will go up and come down,” said Chakrabarty.
Food price inflation rose to 19.83% in the year through December 19, and while policymakers have expressed concern that high food prices could spur broader inflationary pressure, they also note that monetary policy is largely powerless to address supply-side shortages.
“Monetary tools are not always effective for everything. We have to find the cause. If the cause is due to monetary issue, then monetary policy will be effective,” Chakrabarty said.
Credit growth in India, which reached nearly 30 percent in 2007, recently troughed below 10% in annual terms but is expected to climb in coming months. The economy is forecast to grow by roughly 7% in the fiscal year that ends in March.
Chakrabarty said it was “OK” for credit to grow at 12% when the economy was growing at 6%. Chakrabarty expects bank credit to grow 15-20% in the current financial year. Bank credit grew an annual 11.8% on December 18, according to RBI data.
The Financial Express, January 1, 2010, Page 13
Reuters, Hyderabad
The Reserve Bank of India (RBI) will review interest rates at its next policy review scheduled for January 29 and not before, a deputy RBI governor said on Thursday.
“Wait for 29th. It can’t be speculated. If it has to happen, it will happen on 29th. You will have to wait for that,” said KC Chakrabarty, a deputy governor of the RBI, when asked whether and when the central bank would adjust rates.
India and South Korea are widely expected to be among the first Group of 20 nations to follow Australia and raise interest rates as they recover from the global slowdown.
Some economists expect inflation in India to reach 8% by the end of March, above the RBI’s comfort level. The RBI can adjust monetary policy at any time, and has changed interest rates outside of its scheduled quarterly policy reviews on numerous occasions.
Of the six cuts in the repo rate between October 2008 and April, only the last reduction came at a policy review. Chakrabarty became one of the four deputy RBI governors in June, although another deputy heads RBI’s monetary policy department.
Chakrabarty, speaking to reporters on the sidelines of an event in the southern city of Hyderabad, also said the RBI is not worried about yields on the 10-year government bond , which traded at 7.66% on Thursday and last week touched 7.75%, the highest since November 2008.
India is borrowing a record Rs 4.51 lakh crore ($97 billion) this year, and high rates add to the government’s borrowing cost as it manages a fiscal deficit running at 6.8% of GDP, a 16-year highhave not heated up that they need to cool down. Seven to 8 % yield on 10-year is not uncomfortable, dangerous nor worrisome. It will go up and come down,” said Chakrabarty.
Food price inflation rose to 19.83% in the year through December 19, and while policymakers have expressed concern that high food prices could spur broader inflationary pressure, they also note that monetary policy is largely powerless to address supply-side shortages.
“Monetary tools are not always effective for everything. We have to find the cause. If the cause is due to monetary issue, then monetary policy will be effective,” Chakrabarty said.
Credit growth in India, which reached nearly 30 percent in 2007, recently troughed below 10% in annual terms but is expected to climb in coming months. The economy is forecast to grow by roughly 7% in the fiscal year that ends in March.
Chakrabarty said it was “OK” for credit to grow at 12% when the economy was growing at 6%. Chakrabarty expects bank credit to grow 15-20% in the current financial year. Bank credit grew an annual 11.8% on December 18, according to RBI data.
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