RBI likely to pause hike in interest rate

Amid declining growth and moderating inflation, the Reserve Bank of India (RBI) is likely to pause hike in interest rate at the mid-quarterly review of the monetary policy tomorrow.

RBI, which has raised interest rate 13 times since March, 2010 to tame inflation, may change the tight monetary stance as the industrial production has turned negative in October recording a fall of 5.1%.

As regards price situation, although the headline inflation has remained close to double-digit mark in November, there are signs of moderation. The food inflation, according to the data released today, fell to a nearly four-year low of 4.35% during the week ended December 3.

The RBI in its mid-year policy in October had indicated that it might halt rise in interest rate if the inflationary situation does not worsen.

The bigger worry on the economic at this time is to arrest falling growth.

"Domestically, the struggle against inflation and tightening interest rate regime has contributed to lowering of growth in demand and investment. The slowdown in industrial growth is of particular concern as it impacts employment," Finance Minister Pranab Mukherjee said in New Delhi.

State Bank of India Chairman Pratip Chaudhuri had said yesterday the he did not expect the RBI to hike interest rate in its next policy.

"I don't think so because food inflation has come down significantly and steadily. RBI has said 7% is the level they are targeting", he said.

Besides, other experts and economists too are of opinion that RBI would pause hike in interest rate because of economic slowdown and decline in rate of price rise.