Arab Today, arab today india\s central bank set to keep rates on hold
Last Updated : GMT 18:02:14
Arab Today, arab today
Arab Today, arab today

India\'s central bank set to keep rates on hold

Arab Today, arab today

Arab Today, arab today India\'s central bank set to keep rates on hold

London - AFP

India's central bank was widely expected to keep interest rates unchanged on Thursday after inflation accelerated and the pace of growth showed signs of improving, analysts said. Policymakers from the Reserve Bank of India (RBI) meet in the financial capital Mumbai, a day ahead of the federal budget in which the government will outline its spending plans for the new fiscal year, which starts on April 1. Analysts and economists believe the RBI will wait until at least April before deciding on cutting rates, until it is clear that inflation is under control. India's headline inflation accelerated unexpectedly to nearly seven percent last month, data showed Wednesday, well above the bank's comfort level of around five percent. The RBI had already last week lowered the amount of cash commercial banks must keep in reserve -- to spur slackening growth and crank up lending -- which reduces the chances for further action immediately, analysts say. It was the second time the bank had lowered the so-called cash reserve ratio since the start of the year. The RBI had hiked interest rates 13 times since March 2010, but has kept them on hold since late last year. "Inflation is still a bit of a problem and global oil prices are rising," Moody's Analytics senior economist Glenn Levine said on Wednesday. "For a while it looked like the RBI was gearing up for a (March) rate cut... but these hopes have now all but faded," he said. Deepali Bhargava, chief economist at Espirito Santo Securities, also expects no change in policy rates due to concerns about rising global crude prices. Deepali expects the RBI to start cutting rates only in April. Inflation hit a 26-month-low of 6.55 percent rate in January before creeping back up in February. India's industrial production showed an unexpectedly strong 6.8-percent rise in January from a year earlier, far outpacing analysts' forecasts of a 2.1 percent increase. The bank's repo rate at which it lends to commercial banks stands at 8.50 percent while the reverse repo rate that it pays banks for deposits is at 7.50 percent. The economy is expected to grow by just 6.9 percent in the current fiscal year to March 31 -- the weakest pace since the 2008 global financial crisis.  

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