The Federal Reserve's surprise rate cut may also put some more pressure on the central bank to reduce borrowing costs. The RBI may also prune rates to discourage greater foreign inflows amid rising interest rate differential between local and US rates. The rising interest rate arbitrage between Indian and US rates could once again boost foreign capital flows, which could make it tough for the central bank to formulate monetary policy and manage money flows. Higher overseas inflows could also increase money supply and fuel inflation in Asia's third-largest economy. Some economists expect the RBI to maintain status quo on interest rates at its Jan. 29 meeting. The Fed rate cut may push capital inflows and the RBI may reduce rates after March depending on inflation and outlook on economic growth.
Monday, January 28, 2008
Markets watch RBI move as inflation rises
The Federal Reserve's surprise rate cut may also put some more pressure on the central bank to reduce borrowing costs. The RBI may also prune rates to discourage greater foreign inflows amid rising interest rate differential between local and US rates. The rising interest rate arbitrage between Indian and US rates could once again boost foreign capital flows, which could make it tough for the central bank to formulate monetary policy and manage money flows. Higher overseas inflows could also increase money supply and fuel inflation in Asia's third-largest economy. Some economists expect the RBI to maintain status quo on interest rates at its Jan. 29 meeting. The Fed rate cut may push capital inflows and the RBI may reduce rates after March depending on inflation and outlook on economic growth.
Posted by Admin at 3:10 AM
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