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With headline inflation touching 6 per cent, Reserve Bank of India Governor Raghuram Rajan will find it really hard to heed popular demand for lowering rates in his maiden monetary policy review on Friday. Prior to the review, Rajan met Finance Minister P. Chidambaram here on Tuesday.
“RBI and the Finance Ministry are in consultation. We discussed a gamut of issues,” he said after an hour-long meeting with the Finance Minister. He also met Economic Affairs Secretary Arvind Mayaram.
Though a rate reduction is warranted keeping in mind the requirements of growth , there is a general sense in the market that the current rates remain intact Global financial major HSBC Global Research, in its report, also expects no change in the rate.
“Despite the weak growth backdrop, we expect that the RBI, spearheaded by its new Governor, Raghuram Rajan, will keep the policy rate on hold and its liquidity tightening measures in place to help stabilise the currency and anchor inflation expectations. In this context, it will be crucial for RBI to manage expectations carefully by sounding a hawkish tone in its forward guidance. Containing inflation and anchoring the currency are critical to achieving macroeconomic stability and, through this, support growth,” the report said.
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