IMF asks RBI to be cautious on interest rate cut
Updated: Apr 22, 2013 01:03:51pm
New Delhi, April 22 (KNN) Amidst widespread expectations of interest rates cut by the Reserve Bank next month, the IMF has advised the Indian central bank to remain “cautious” and avoid “pre-mature “ easing of the monetary policy.
The advice does not augur well for Indian industry which has seen grown decelerating to just about 0.9 per cent for the April-February period and the impact of slowdown has hit hard the real sectors –micro, small and medium – of the economy. The IMF advice to RBI is based on concerns over inflation which still hovers over 10 per cent at the retail level, although at the headline Wholesale Price Index level, it is much lower.
“India’s inflation had been hovering close to 10 per cent for several years, but since the end of last year, there has been a deceleration although it is not yet clear whether underlying inflation is weakening.
“Despite slowing growth, the central bank should remain cautious and avoid premature easing of monetary policy, until the inflation rate’s downward trend is confirmed, say IMF economists. The government’s determination to continue fiscal consolidation is also helpful, as it creates room for monetary easing down the road, they add,” an IMF report has said.
The Reserve Bank is scheduled to review the credit policy in the first week of May amidst expectations of at least 50 basis points cut in the policy interest rate, called Repo rate in the banking jargon. (KNN)
The advice does not augur well for Indian industry which has seen grown decelerating to just about 0.9 per cent for the April-February period and the impact of slowdown has hit hard the real sectors –micro, small and medium – of the economy. The IMF advice to RBI is based on concerns over inflation which still hovers over 10 per cent at the retail level, although at the headline Wholesale Price Index level, it is much lower.
“India’s inflation had been hovering close to 10 per cent for several years, but since the end of last year, there has been a deceleration although it is not yet clear whether underlying inflation is weakening.
“Despite slowing growth, the central bank should remain cautious and avoid premature easing of monetary policy, until the inflation rate’s downward trend is confirmed, say IMF economists. The government’s determination to continue fiscal consolidation is also helpful, as it creates room for monetary easing down the road, they add,” an IMF report has said.
The Reserve Bank is scheduled to review the credit policy in the first week of May amidst expectations of at least 50 basis points cut in the policy interest rate, called Repo rate in the banking jargon. (KNN)
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