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05-09-2012, 10:15 AM #1
Little room for RBI to cut rates further: Gokarn
The Reserve Bank has little room for lowering interest rates further as it still sees inflationary pressure in the medium to long term, Deputy Governor Subir Gokarn said on Tuesday.
"We started that process (reducing interest rates ) in April. But if you look at our inflation projections in relation to what we consider as long-term or medium objective, there are inflation pressures. That in a sense, limits the room that we have to reduce rates," he said.
He said although growth and inflation balances are shifting favourably, RBI sees inflationary pressure in the medium and long-term.
"As we said in policy guidance, while the growth and inflation balance is now shifting favourably, that (though) growth is slowing down, inflation is also coming down along with it. That allows us (RBI) some room to reduce policy rates," he said.
After a gap of three years, Reserve Bank Governor D Subbarao last month slashed short term-lending rate by 0.50 percentage points to 8 per cent.
In March, it slashed CRR - the portion of deposits banks are required to keep with the central bank - by 0.75 percentage points to 4.75 per cent, a step that infused Rs 48,000 crore into the economy.
Replying to a query on rupee fluctuations, Gokarn said there may be some speculative opportunities and RBI is taking necessary steps to curb that.