RBI may hike rates again next month
The Prime Minister’s economic think-tank on Saturday said the RBI may go for another rate hike in its mid-quarterly review next month if inflation does not come down in the next four weeks from the present level of 10.55 per cent.
“I think the RBI will take a decision. But that depends on how inflation continues to behave in the next four weeks. Therefore, they will make some decision towards next month,” said C. Rangarajan, the chairman of the Prime Minister’s Economic Advisory Council.
If inflation persists at double-digit levels, action will probably be required, he told reporters on the sidelines of his lecture on “Globalisation and the International Financial Crisis” at the University of Hyderabad. In its quarterly review last month, the RBI had raised the short-term borrowing and lending rates by 50 and 25 basis points, respectively, to curb inflation. For the first time, the RBI will come out with a mid-quarterly review on September 16.
Food inflation declined moderately to 9.53 per cent for the week ended July 24 from 9.67 per cent a week ago as fruits and vegetables became cheaper. Overall inflation stood at 10.55 per cent in June. Mr Rangarajan, however, said that a good monsoon may ease inflationary levels.
“Our own projections say as a result of a good monsoon, the agriculture output will go up between 4 and 5 per cent this year and it will have a favourable affect on the availability of food grains. This will dampen the inflationary expectations,” he said. “We have inflation at uncomfortable high levels and (this) needs to be addressed. The RBI is taking the appropriate action. It is following a series of small steps rather than a big step. The RBI move is in the right direction,” he added. —PTI
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