Home Economy India’s central bank could raise rates once again

India’s central bank could raise rates once again


Mumbai: With inflation still above comfort levels, fears of a ninth rate hike in 15 months loomed large as India’s central bank was set to announce its monetary policy for the current fiscal Tuesday.

Latest data showed that food inflation rose for the second consecutive week to 8.76 percent for the week ended April 16.

The annual rate of inflation too had shown an increase, rising to 8.98 percent in March from 8.31 percent the month before, way above the target of 8 percent set by the central bank.

Fearing a hike, the benchmark indices at the stock markets had closed last week in red and on Monday were ruling weak. Interest rate sensitive stocks like banking too were in the negative.

“Fundamentals as in a strong deposit growth and first half of fiscal being a lean credit growth pressure may not warrant a steep hike,” said Rajesh Iyer, head products and research, Kotak Wealth Management.

“But having said that the latest inflation number that came out on April 25 was higher than RBI estimates. RBI may still be okay to go ahead with the same as between inflation and growth the latter is yet to see any slowdown. Inflation surely remains sticky,” added Iyer.

RBI Governor D. Subbarao, will also have an eye on the industrial output, with India Inc. repeatedly saying that higher interest rates was beginning to hurt.

India’s industrial output grew by a lower than expected 3.6 percent in February, bogged down by slow production in the manufacturing sector, particularly capital goods.