Firstpost
  • Home
  • Video Shows
    Vantage Firstpost America Firstpost Africa First Sports
  • World
    US News
  • Explainers
  • News
    India Opinion Cricket Tech Entertainment Sports Health Photostories
  • Asia Cup 2025
Apple Incorporated Modi ji Justin Trudeau Trending

Sections

  • Home
  • Live TV
  • Videos
  • Shows
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Health
  • Tech/Auto
  • Entertainment
  • Web Stories
  • Business
  • Impact Shorts

Shows

  • Vantage
  • Firstpost America
  • Firstpost Africa
  • First Sports
  • Fast and Factual
  • Between The Lines
  • Flashback
  • Live TV

Events

  • Raisina Dialogue
  • Independence Day
  • Champions Trophy
  • Delhi Elections 2025
  • Budget 2025
  • US Elections 2024
  • Firstpost Defence Summit
Trending:
  • PM Modi in Manipur
  • Charlie Kirk killer
  • Sushila Karki
  • IND vs PAK
  • India-US ties
  • New human organ
  • Downton Abbey: The Grand Finale Movie Review
fp-logo
RBI policy review: Rajan likely to hold rates steady, sound less dovish
Whatsapp Facebook Twitter
Whatsapp Facebook Twitter
Apple Incorporated Modi ji Justin Trudeau Trending

Sections

  • Home
  • Live TV
  • Videos
  • Shows
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Health
  • Tech/Auto
  • Entertainment
  • Web Stories
  • Business
  • Impact Shorts

Shows

  • Vantage
  • Firstpost America
  • Firstpost Africa
  • First Sports
  • Fast and Factual
  • Between The Lines
  • Flashback
  • Live TV

Events

  • Raisina Dialogue
  • Independence Day
  • Champions Trophy
  • Delhi Elections 2025
  • Budget 2025
  • US Elections 2024
  • Firstpost Defence Summit
  • Home
  • Business
  • Economy
  • RBI policy review: Rajan likely to hold rates steady, sound less dovish

RBI policy review: Rajan likely to hold rates steady, sound less dovish

FP Archives • August 5, 2014, 08:59:43 IST
Whatsapp Facebook Twitter

RBI Governor Raghuram Rajan will also likely reiterate his warning about the potential destabilising impact of outflows from emerging markets should the U.S. Federal Reserve increase interest rates earlier than expected.

Advertisement
Subscribe Join Us
Add as a preferred source on Google
Prefer
Firstpost
On
Google
RBI policy review: Rajan likely to hold rates steady, sound less dovish

Mumbai: The Reserve Bank of India is expected to keep interest rates steady while adopting tougher rhetoric on inflation at a policy review on Tuesday due to growing concerns that disappointing monsoon rains will lead to a surge in food prices.

RBI Governor Raghuram Rajan will also likely reiterate his warning about the potential destabilising impact of outflows from emerging markets should the U.S. Federal Reserve increase interest rates earlier than expected.

STORY CONTINUES BELOW THIS AD

The tone is likely to be less dovish than at the RBI last policy meeting back in June.

Back then, the RBI surprised markets by toning-down its anti-inflation rhetoric in what was widely seen as a goodwill gesture to Prime Minister Narendra Modi, whose landslide election victory in May was built on voters’ hopes that he would put momentum back in India’s economic growth.

More from Economy
Inflation likely to be a big focus area for budget 2024, say sources Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates? Explained: Will the Bank of Japan break tradition and raise interest rates?

Instead, the RBI could reiterate a commitment to helping spur lending - a priority for the Modi government - by providing more funding in money markets or by further lowering lenders’ mandatory minimum bond holdings, known as the statutory liquidity ratio (SLR).

The RBI had unexpectedly cut the SLR in June by a half a percentage point.

“I expect the tone to be less dovish than the June policy as food prices are already putting upward pressure on inflation,” said A. Prasanna, economist at ICICI Securities Primary Dealership in Mumbai.

“The next reading on inflation could be significantly higher than the previous reading. However the RBI may take some comfort from core CPI inflation easing and the incipient recovery in industrial production.”

Nearly all 43 economists surveyed in a Reuters poll published last week expect the RBI to leave its repo rate on hold at 8 percent after last raising it by a quarter percentage point in January.

STORY CONTINUES BELOW THIS AD

Analysts do not expect any changes in policy this year despite efforts by the Modi government to keep food prices in check and economic growth recovering slightly. Policymakers have taken steps to contain food prices by curbing hoarding of food articles and setting limits on export of onions and potatoes, which are staples in Indian cooking.

Instead, the biggest concern remains below average rainfalls that are believed to be pushing up vegetable and fruit prices by double digits, making the outlook for inflation unpredictable.

Vegetable prices rose 9 percent while fruit prices rose nearly 21 percent year on year in June, when monsoon was 48 percent below average, although rainfall improved in July, the second month of the monsoon season.

Analysts say inflation is likely to accelerate as a result, and then there is the additional risk the Middle East tensions could push crude oil import prices.

In June, the inflation rate was the lowest since government started publishing the figures in January 2012, with the consumer price index showing a 7.31 percent rise from a year earlier.

STORY CONTINUES BELOW THIS AD

An upsurge in inflation would kill any market hopes for interest rate cuts to spur an economy that has shown signs of a slight recovery in growth. Industrial production and manufacturing activity data have raised hopes that the economy could move above the sub-5 percent growth rate seen in the previous two years.

Meanwhile, at home the RBI will want to keep a close eye on the government’s ambitious efforts to reduce the fiscal deficit to 4.1 percent of gross domestic product.

“The central bank is likely to acknowledge positive fiscal developments and softer inflation, but with an eye on potential risks to the price trajectory,” wrote Radhika Rao, economist at DBS Bank in a note on Monday.

Reuters

Tags
Inflation India RBI Reserve Bank of India Interest rate oil Repo rate WPI Raghuram Rajan Monsoon import CPI rainfall Urjit Patel Nachiket Mor vegetable price
End of Article
Written by FP Archives

see more

Latest News
Find us on YouTube
Subscribe
End of Article

Top Stories

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

As Russia pushes east, Ukraine faces mounting pressure to defend its heartland

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Why Mossad was not on board with Israel’s strike on Hamas in Qatar

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe

Top Shows

Vantage Firstpost America Firstpost Africa First Sports
Latest News About Firstpost
Most Searched Categories
  • Web Stories
  • World
  • India
  • Explainers
  • Opinion
  • Sports
  • Cricket
  • Tech/Auto
  • Entertainment
  • IPL 2025
NETWORK18 SITES
  • News18
  • Money Control
  • CNBC TV18
  • Forbes India
  • Advertise with us
  • Sitemap
Firstpost Logo

is on YouTube

Subscribe Now

Copyright @ 2024. Firstpost - All Rights Reserved

About Us Contact Us Privacy Policy Cookie Policy Terms Of Use
Home Video Shorts Live TV