Economists see another rate hike before July
Earlier in the day, RBI moderately hiked key short-term rates and banks cash reserves by 0.25%. Live Analysis I Timeline: CRR changes | SLR changes | Reactions
By PTI |
NEW DELHI: Leading economists on Tuesday said they expect the Reserve Bank to tighten monetary policy yet again, possibly before the next review in July, to tame inflation.
They said during the course of 2010, the central bank is likely to increase its short-term rates by another 75-100 basis points (bps). Earlier in the day, the central bank moderately hiked key short-term rates and banks cash reserves by 0.25 per cent to rein in the near double-digit inflation.
"Citi maintains the view of a minimum additional 75 bps hike in 2010, with a possibility of an inter-policy hike before the July 27 meeting," Citi India economist Rohini Malkani said.
India Infoline economist Ashutosh Datar pointed out that more inflationary pressures have emerged and a firm growth outlook can lead to further increase in prices. "Consequently, we expect the RBI to continue its gradual normalisation of its monetary policy with further 100 bps increase in both repo and reverse repo (short-term lending and borrowing) rates over the course of this financial year," he said.
Crisil chief economist Dharmakriti Joshi said given the growth and inflation forecasts, there could have been a sharper rate hike. He said pointed out that although the RBI move will not push up interest rates, it will help anchor inflationary expectations.
Religare Capital Markets chief economist Jay Shankar said although the hike may provide relief to the markets in the short-term, it also raises the probability of inter-policy rate hike before the next policy in July. "The relatively dovish policy move may be aimed at keeping borrowing programme running smooth and the cost low," he added.
On the CRR front, which was hiked to 6 per cent, Dun & Bradstreet's economy analysis group head Yashika Singh said, "going forward, we expect a further hike in the CRR during May-June, given that the upward pressures on liquidity are likely to persist on account of an expected sustained foreign fund inflows."
Moreover, the apex bank itself did not rule out further tightening of monetary policy before the next review, slated for July 27, as vagaries of monsoon, volatile crude prices and demand pressure may push up inflation.
Governor D Subbarao told reporters after the policy announcement in Mumbai that, "I will not rule out a mid-cycle action because we do not know how the situation will evolve." The governor further pointed out that even after the hikes in short term key rates, they are still in the negative, if inflation is adjusted for.
They said during the course of 2010, the central bank is likely to increase its short-term rates by another 75-100 basis points (bps). Earlier in the day, the central bank moderately hiked key short-term rates and banks cash reserves by 0.25 per cent to rein in the near double-digit inflation.
"Citi maintains the view of a minimum additional 75 bps hike in 2010, with a possibility of an inter-policy hike before the July 27 meeting," Citi India economist Rohini Malkani said.
India Infoline economist Ashutosh Datar pointed out that more inflationary pressures have emerged and a firm growth outlook can lead to further increase in prices. "Consequently, we expect the RBI to continue its gradual normalisation of its monetary policy with further 100 bps increase in both repo and reverse repo (short-term lending and borrowing) rates over the course of this financial year," he said.
Crisil chief economist Dharmakriti Joshi said given the growth and inflation forecasts, there could have been a sharper rate hike. He said pointed out that although the RBI move will not push up interest rates, it will help anchor inflationary expectations.
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Religare Capital Markets chief economist Jay Shankar said although the hike may provide relief to the markets in the short-term, it also raises the probability of inter-policy rate hike before the next policy in July. "The relatively dovish policy move may be aimed at keeping borrowing programme running smooth and the cost low," he added.
On the CRR front, which was hiked to 6 per cent, Dun & Bradstreet's economy analysis group head Yashika Singh said, "going forward, we expect a further hike in the CRR during May-June, given that the upward pressures on liquidity are likely to persist on account of an expected sustained foreign fund inflows."
Moreover, the apex bank itself did not rule out further tightening of monetary policy before the next review, slated for July 27, as vagaries of monsoon, volatile crude prices and demand pressure may push up inflation.
Governor D Subbarao told reporters after the policy announcement in Mumbai that, "I will not rule out a mid-cycle action because we do not know how the situation will evolve." The governor further pointed out that even after the hikes in short term key rates, they are still in the negative, if inflation is adjusted for.
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