Reserve Bank would be able to cut key interest rate as inflation dips further: P Chidambaram

SME News, Saturday, Nov 24, 2012 12:10:43 PM IST

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NEW DELHI: Banking sector regulator Reserve Bank of India (RBI) would be able to lower the key interest rates with the further easing of inflation, as per the hopes raised by the Finance Minister P Chidambaram.

“As inflation eases further, there will be an opportunity for monetary policy to take measures to mitigate growth risks,” he said in a written reply to the Lok Sabha.

RBI has adopted the tight monetary policy on the back of high inflationary pressures, he said. The tightening of monetary policy is RBI's efforts to control inflation has resulted in slowing down of investment and growth.

In its last policy review, RBI kept interest rate (repo rate) unchanged. It reduced the Cash Reserve Ratio or CRR (percentage of deposits banks keep with RBI) by 0.25 per cent.

The RBI will announce its mid quarter review of the monetary policy on December 18.

Inflation for September, as measured by the wholesale price index (WPI) was 7.81 per cent. RBI expects the March-end inflation at 7.5 per cent.

In the first quarter of the current fiscal, country's growth rate slowed to 5.5 per cent, from 8 per cent in the year-ago period.

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