New Delhi: With inflation still running high, the Reserve Bank of India at its fourth bi-monthly policy review today is unlikely to cut interest rates.
Consumer price index (CPI) -based retail inflation eased to 7.8 percent in August from 8.59 percent in April. Wholesale price index (WPI) inflation has also eased to 3.74 percent in August from 5.55 percent at the start of the current fiscal.
The RBI headed by the monetarist-inclined Governor Raghuram Rajan has set a target for CPI inflation at 8 percent by January 2015 and 6 percent by January 2016. At an industry chamber Ficci-organised banking conference earlier this month, Rajan had said there was a need to “break the back” of inflation.
“The real problem is inflation that is persistent. We have been emphasising again and again in order to ‘break the back’ of inflation, we got to break this persistence,” Rajan had said at an event.
“I have no desire to keep interest rates high for even a second longer. I want to bring down interest rates when feasible. It will be feasible when we would have won the fight against inflation,” he had added on the question of RBI rates.
The RBI left key interest rates unchanged in its third bi-monthly monetary policy review early August, saying near-term tightening is not expected if inflation continues to ease.
The repo rate, or the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements, was left unchanged at 8 percent.
The reverse repo rate, or the interest that the RBI pays to commercial banks when they park their surplus short-term funds with the central bank, had been adjusted to 7 percent. IANS
