Reserve Bank of India Governor Y V Reddy today kindled hopes of softer interest rates in the country, saying the monetary and credit policy review later this month will pay considerable attention to global events as well as Finance Minister P Chidambaram's plea for lower interest rates. | |
| Reddy's comments were a pleasant surprise for bond traders as he typically goes into a silent mode ahead of the scheduled monetary policy review. |
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| "If the governor is saying they will take cognizance of global factors, he means the US economy. And with US Federal Reserve most likely to cut rates, RBI may just pre-empt it," said a bond dealer. |
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| There was also interpretation that Reddy's comments meant chances of a hike in cash reserve ratio by the central bank had diminished. |
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| To a question on whether the central bank was comfortable with the recent stability of the rupee, Reddy said the central bank's monetary policy statement would have to be read carefully. |
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| Following are the excerpts of Reddy's talk with reporters on the sidelines of a seminar organised by Indira Gandhi Institute of Development Research: |
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| Liquidity has been surging because of IPO money, FX flows. So how do you see it going ahead? |
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| In the past also, liquidity has been somewhat volatile, sometimes tight, and sometimes easy. One has to take a slightly long-term view and not a highly contextual view of liquidity.This will be looked at (in) the policy statement. |
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| At the recent bankers' meeting, Chidambaram indicated a softer regime and asked banks to cut rates. What could be the impact of this on the policy rates? |
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| Monetary policy will extensively cover all these issues. |
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| Globally, policy rates are easing. Do you see this pressurising Indian policy rates? |
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| Let me put it this way. If you see in terms of processes, Ben Bernanke cannot decide by himself because it has to be done through a process. So if he himself doesn't know what's going to happen, I am sure it will not be possible for RBI to know. |
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| The rupee has been stable for quite some time on RBI's intervention. Are you satisfied with the stability of the rupee? |
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| You have to read the monetary policy carefully. I have to draft it carefully. |
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| Global food, oil prices are high. What are your concerns on these? |
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| This type of situation was anticipated, not precisely, but certainly the pressure has been flagged off for more than a year. We have been sensitive to that and we will continue to be sensitive to that, particularly because these are essential commodities, which have a very great impact on inflationary expectations. |
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| How do you see the global uncertainties unfolding, and what could be the impact on India? |
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| There will be considerable attention to this in the policy. On a very preliminary basis, these global financial uncertainties were not entirely unanticipated if you had closely followed the monetary policy statements. This intensity was not predicted, nor the duration expected. |
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| The outlook seems to be far more uncertain for the global situation than before. We have to analyse that and we will undertake a detailed analysis and be able to articulate to the extent possible the various situations and implications. From a public policy point of view, these are implications that we have to keep in view. |
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