Overlooking the demand of India Inc to lower interest rates, the Reserve Bank in its policy review may refrain from cutting policy rate as the inflation of manufactured goods is still high.
“I don’t see moderation in the interest rate (in the coming policy). CRR (Cash Reserve Ratio) cut I am not hopeful,” SBI Chairman, Mr Pratip Chaudhuri said.
“I think there would be strong measures to indicate that RBI wants inflation to be stamped out totally,” he said.
Headline inflation fell to a two—year low of 7.47 per cent in December, 2011. Food inflation entered the negative zone in mid—December and stood at (—) 0.42 per cent as of January 7, as per the latest numbers released by the government.
The RBI will unveil its third quarterly review of monetary policy on January 24.
Industry has been demanding cut in interest rate to prop up economy. In the second quarter (July—September) of the current fiscal, the economy recorded a growth of 6.9 per cent, the lowest level in over two years.
In its last review in December, the RBI pressed the pause button on its monetary tightening measures and said it might go for rate cuts in the future depending on moderation in inflation.
“From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth,” RBI Governor, Mr Subbarao had said in the last policy review.
According to Indian Overseas Bank Chairman and Managing Director, Mr M Narendra, the central bank is likely to keep policy rates unchanged for a while.