Arab Today, arab today india rate cut unlikely as weak rupee weighs
Last Updated : GMT 02:18:28
Arab Today, arab today
Arab Today, arab today

India rate cut unlikely as weak rupee weighs

Arab Today, arab today

Arab Today, arab today India rate cut unlikely as weak rupee weighs

Mumbai - AFP

India\'s central bank was expected to keep interest rates on hold Monday with concerns over the rupee trading near record lows likely to outweigh the fall in inflation, most analysts said. The central bank has cut borrowing rates three times since the start of 2013 to try to kickstart an economy which has been growing at five percent, a decade low. But with the rupee just above lifetime lows, a ballooning current account deficit and the narrowly based retail inflation index at near double digits, analysts said a rate cut at Monday\'s central bank meeting was unlikely. \"We expect no action from the Reserve Bank of India this time. There are concerns relating to the rupee,\" CLSA economist Rajeev Malik told AFP. The central bank was due to release its monetary policy statement at 0530 GMT. Emerging market currencies across the world have been hit by speculation the US Federal Reserve will cut back on economic stimulus that has fuelled investment flows into developing nations. Malik said the central bank was more likely to cut rates at its July meeting \"by which time the Indian currency should be more stable and the trends for the ongoing monsoon would be clearer\". The Wholesale Price Index, containing the biggest basket of goods and India\'s most closely watched inflation gauge, slowed to 4.7 percent in May on an annual basis, from its 4.89 percent level in April, figures showed on Friday. The wholesale price inflation reading was the lowest since late 2009. But monetary authorities have made it \"crystal clear that while lower wholesale price inflation is a necessary condition for further rate reductions, it is not sufficient\", said Credit Suisse economist Robert Prior-Wandesforde. India\'s central bank\'s key benchmark lending rate -- known as the repo -- now stands at 7.25 percent. Business leaders want the central bank to slash interest rates to spur the economy. But more rate cuts could lead to an even weaker rupee, pushing up the cost of imports and widening India\'s current account deficit, which hit a record 6.7 percent of gross domestic product in the December quarter. \"Global factors and balance of payments are major concerns for the central bank at this stage,\" CLSA\'s Malik said. The Congress party government, led by Prime Minister Manmohan Singh, has been battered by a spate of corruption scandals and is keen to revive economic growth before facing voters in general elections due in 2014. The currency\'s slide to a record low of 58.98 rupees to the dollar last week has sparked fears it could prompt a resurgence in inflation as imports become more costly. The Indian unit, which just three months ago was trading in the mid-40 rupee range, closed at 57.51 to the dollar on Friday. Barclays Capital said it was sticking by its forecast the bank would cut rates due to easing inflation, but conceded there was \"increased risk of a pause\" due to the rupee\'s weakness.

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