The Reserve Bank of India (RBI) is unlikely to signal a hike in interest rates in the monetary review this week as economic recovery is still in the nascent stages, but may ask banks to keep more cash with the central bank to check inflationary pressures, say economists. Moody’s economy.com said, “With the recovery in its early stages, the Reserve Bank of India is expected to refrain from hiking its twin policy rates this month.’’ However, the RBI — in its review on October 27 — will raise the cash reserve ratio (CRR), the proportion of deposits that banks keep with the central bank, by 50 basis points to signal to the markets that it has adopted a tightening bias, it added. Think-tank Economist Intelligence Unit (EIU) research director Manoj Vohra said the central bank is unlikely to signal a hike in key rates in its monetary policy, but can raise the CRR by 25-50 basis points. “The RBI will have a close look at the cash reserve ratio (CRR). It might hike CRR by 25-50 basis points,’’ Vohra said. DBS Bank said the statutory liquidity ratio (SLR), the minimum share of bank deposits to be held in government bonds, cash and gold, could be hiked as early as next week by one percentage point. “We do not rule out a one percentage point hike in the SLR rate to 25% reversing the 1-point cut implemented in November 2008,’’ it said in a report. HDFC Bank chief economist Abheek Barua said, “We continue to believe that the policy will maintain a status quo...RBI could wait a trifle longer before moving, especially since there are equally strong concerns about whether the current economic recovery will sustain.’’ Crisil principal economist D K Joshi said RBI might not review rates in the policy. The Prime Minister’s Economic Advisory Council has already said it does not expect the Reserve Bank to change its monetary stance in the policy review on October 27, as well as in its next review. The RBI faces a challenge to strike a balance between promoting growth and checking inflationary pressures. Though economy is showing some signs of improvement, the recovery is still not on a strong footing. Impacted by the global financial meltdown, economic growth has slowed to 6.1% in the first quarter of this fiscal against over 7.5% growth a year ago. Industry, however, has started picking up, recording a growth of 7.2%in july and 10.4% in August. Inflation, on the other hand, reached 1.21% for the week ended October 10 as prices of major food items firmed up further. There are expectations that inflation might reach the 6% mark by the end of the current fiscal. AGENCIES
* No hurry to call off stimulus: PM *Hua Hin (Thailand): PM Manmohan Singh on Sunday said the global economy was not fully out of trouble and ruled out any premature withdrawal of stimulus packages for industry. Singh also said he was satisfied with the RBI’s policy stance and that the central bank was the competent authority to decide on interest rates. AGENCIES --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
