NEWS & ADVICE : PERSONAL LOAN
RBI to continue with the present interest rate Regime
By Vaibhav Aggarwal
Oct 19, 2009
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With a few days left for RBI's review that is scheduled for 27th October the centre is pressing hard against any interest rate hike. The government's policy advisors support their argument by saying that any interest rate hike might hinder the economy's recovery.

The apex banks review comes in the backdrop of a double digit growth in the IIP (Index of Industrial Production) in August after a gap of 22 and expectations of inflation crossing 7% by March 2010.

Dr C Rangarajan, the chairman of Prime Minister Manmohan Singh's economic advisory council (EAC), said that RBI could tamper with the liquidity in the market but it would maintain a soft interest rate regime unless the inflation shoots up sharply.

Dr. Rangarajan said "So long as inflationary pressures are moderate, the current monetary stance can continue." He also said that the central bank would first have to stop injecting liquidity and then mop up excessive cash.

Within the central bank also the timing to exit from the accommodative policy is being debated. RBI governor, D Subbarao said in Istanbul earlier this month that since the Indian economy was doing better than most of the advanced economies that are in recession, they could exit the accommodative monetary policy before others do.

The governor, however, said "An early exit on inflation concerns runs the risk of derailing the fragile growth, while a delayed exit may engender inflation expectations"

 


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