‘RBI to keep interest rates unchanged’

A nascent recovery may compel the Reserve Bank of India (RBI) to take very gradual steps to unwind the monetary as well as fiscal stimulus according to Deutsche Bank. It expects the central bank to raise the cash reserve ratio (CRR) by 50 basis points, but leave policy interest rates unchanged at its January 29 policy meeting. Speaking to ET, Deutsche Bank India economist Taimur Baig said: “Unwinding will be gradual as one does not want to undermine the signs of a fragile recovery. From the macro-economic point of view, it may not be prudent to unwind aggressively because the nature of recovery is still nascent. ”The bank expects the economy to grow 7.2% in FY10. Given that the excess liquidity in the system is around 4% of the GDP and inflation continues to be high, the central bank may express concerns about the risks of excessive liquidity, feels Deutsche Bank. The review may articulate the forthcoming steps in the exit strategy from the present stance and a greater clarity on the central bank’s operational and policy guidelines for the rest of the year could act as a powerful signal for market participants.

For Further: economictimes.indiatimes.com/news/economy/indicators/RBI-to-keep-interest-rates-unchanged/articleshow/5496481.cms