Rajan unlikely to surprise on rate front this time around

Tags: News
RBI Governor Raghuram Rajan, who surprised the markets with his actions at three policy meets after taking charge, is unlikely to do so again and is widely expected to keep key rates on hold despite a clamour to boost sagging growth amid easing inflationary pressure.

Various industry polls and analysts are predicting a status quo from the Reserve Bank in the third quarter monetary policy review tomorrow, with a poll by foreign lender RBS saying over 80 per cent of bankers, insurers and corporates expect no changes in any of the key rates.

Finance Minister P Chidambaram had last week strongly pitched for growth-supporting measures from the central bank. Speaking at the World Economic Forum in Davos, he said the RBI has an equal role to support growth.

SBI Chairperson Arundhati Bhattacharya declined to take a guess, saying, "The RBI will act in the best interests of everyone."

Two other public sector bankers - Canara Bank's R K Dubey and Oriental Bank of Commerce chief S L Bansal, told PTI that they expect the RBI to maintain status quo tomorrow.

HSBC India Country Head Naina Lal Kidwai said, "I believe that RBI will keep interest rate unchanged in this policy review. The message to the industry is quite important to make sure that we can get interest rates to at least plateau, if not come down."

Rajan had surprised the markets on each of the past three occasions, increasing lending rates by 0.25 per cent in the September mid-quarter review and also in the October policy when everyone was expecting a cut. He left the rates unchanged at 7.75 per cent in the December mid-quarter review.

Rating agency Icra expects the RBI to retain the repo rate (at which RBI lends to banks) at the current level of 7.75 per cent tomorrow even though inflation eased in December.

With wholesale inflation cooling to a five-month low of 6.16 per cent in December, there is renewed demand from industry for a reduction in interest rates.

However, an SBI research report said, "RBI may keep rates steady on January 28 and wait for more information, particularly on trajectory of food inflation, before deciding the next course of policy action because core inflation has remained more or less flat in December 2013."

Ahead of the RBI policy meeting, the BSE Sensex closed 426.11 points down at 20,707.45. The rupee slid 44 paise to end at 63.10 versus the US dollar.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • The Constitution defines complimentary roles for executive and judiciary

    For avid constitutionalists, it is important to remember that while the executive and the judiciary constitute two major pillars of any democratic ord

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Urs Schöttli

Hong Kong’s democratic dilemma

The 19th and 20th centuries were very unkind to China. ...

Parvez Imam

Does a piece of paper define your identity?

Papers are not papers, after all! Just like you are ...

Bubbles Sabharwal

The importance of looking at the bright side

Now here’s the thing. When your body defies gravity, it ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture