Rajan Seen Raising Key Rate to Tame Fastest Asia Inflation India’s central bank will probably raise its benchmark interest rate tomorrow for the second straight month, stepping up the fight against the fastest consumer-price inflation in Asia. Governor Raghuram Rajan, who vowed to quell price pressures when he took over at the Reserve Bank of India in September, will boost the repurchase rate by 25 basis points to 7.75 percent, 23 of 30 analysts said in a Bloomberg News survey. The majority in another Bloomberg poll said he’ll further ease liquidity curbs that were imposed in July to support the rupee. India’s gauge of consumer inflation rose almost 10 percent last month from a year earlier as bottlenecks in the supply of everything from food to energy push up prices. That leaves Rajan, a former International Monetary Fund chief economist, with little choice except to curb domestic demand even as economic growth slows, according to Nomura Holdings Inc. “Higher benchmark borrowing costs are likely to weigh on already weak economic expansion,” said Sonal Varma, an economist at Nomura Holdings in Mumbai. “That’s the price India has to pay to get better control of the cost of living.” The rupee has strengthened 9 percent since Rajan became RBI chief, buoyed by his steps to attract inflows of dollars and the Federal Reserve’s decision to maintain U.S. monetary stimulus. The currency remains 13 percent weaker against the dollar in the past 12 months, making imports such as crude oil costlier. One respondent in the repo rate survey said Rajan will increase the benchmark to 8 percent. The rest expect no change. bloomberg/news/2013-10-27/rajan-seen-raising-key-rate-again-to-tame-fastest-asia-inflation.html
Posted on: Mon, 28 Oct 2013 08:10:22 +0000
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