Inflation needs to be reined before lowering policy rates
By Neelima Shankar
Jan 25, 2012
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The speculations about the outcome of the monetary policy review have come to an end. The Reserve Bank of India reduced the CRR by 50 basis points but kept the repo and reverse repo rate on hold.

The reduction in CRR is expected to assuage the liquidity in the system as well as mid term inflation. The move is also expected to support the growth rate of the country. The inflation rate has dipped considerably but it can still bounce back. Due to the reason RBI has not reduced the policy rates.

The Managing Director and Chief Executive of Karnataka Bank, Mr. P. Jayarama Bhat said, "My opinion is that reduction in policy rates may not be that aggressive until the inflation comes down to the expected level that RBI has envisaged."
Experts believe that it will mark the reversal of the interest rate cycle.


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