IMF urges further monetary tightening to stem inflation
19/09/2014 12:35
According to media reports, the International Monetary Fund (IMF) has urged the Reserve Bank of India (RBI) to tighten monetary policy even further and raise interest rates in a bid to stem inflation on a sustained basis.
The Washington-based lender urged policymakers to take more measures to bring down persistently high inflation and stem a large fiscal shortfall in Asia’s third biggest economy which last quarter grew at the sharpest clip in more than two years.
“Sustainably lowering inflation will also require further increases in the policy rate and a simpler monetary framework with clear objectives and operational autonomy for the RBI," said the IMF note.
Interestingly, the Governor of the Reserve Bank of India Raghuram Rajan also dashed hopes of a near-term rate cut this week as he stressed upon the need to bring down inflation even further, in line with the central bank’s targets.
While wholesale inflation fell to the lowest level in nearly five years at 3.74 per cent in August 2014, consumer inflation, the RBI’s most watched gauge, stood at a high level of 7.8 per cent.
The RBI aims to keep consumer price inflation within 8 per cent by January 2015 with the rate expected to fall to 6 per cent by January 2016.
The apex bank is likely to keep its key repo rate unchanged at 8 per cent on September 30.
19/09/2014 12:35
According to media reports, the International Monetary Fund (IMF) has urged the Reserve Bank of India (RBI) to tighten monetary policy even further and raise interest rates in a bid to stem inflation on a sustained basis.
The Washington-based lender urged policymakers to take more measures to bring down persistently high inflation and stem a large fiscal shortfall in Asia’s third biggest economy which last quarter grew at the sharpest clip in more than two years.
“Sustainably lowering inflation will also require further increases in the policy rate and a simpler monetary framework with clear objectives and operational autonomy for the RBI," said the IMF note.
Interestingly, the Governor of the Reserve Bank of India Raghuram Rajan also dashed hopes of a near-term rate cut this week as he stressed upon the need to bring down inflation even further, in line with the central bank’s targets.
While wholesale inflation fell to the lowest level in nearly five years at 3.74 per cent in August 2014, consumer inflation, the RBI’s most watched gauge, stood at a high level of 7.8 per cent.
The RBI aims to keep consumer price inflation within 8 per cent by January 2015 with the rate expected to fall to 6 per cent by January 2016.
The apex bank is likely to keep its key repo rate unchanged at 8 per cent on September 30.
