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Interest rate changes unlikely in Monetary Polic Review: FM

Written by: Staff
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New Delhi, June 12 (UNI) Notwithstanding the hike in Repo rate and Reverse Repo rate, Finance Minister P Chidambaram says he does not expect any changes in interest rates as part of the RBI's monetary policy review on July 25.

''I think what the bank did in June should hold and I don't see any major change being made in the next quarterly review,'' Mr Chidambaram said in an interview to Bloomberg TV in Brussels.

The Finance Minister also said he expected the stock markets to stabilise as the P/E ratios were in a comfort zone.

The Finance Minister justified the Central Bank's signalling of the hardening of intereest rates by hiking the repo rate and reverse repo rate by 25 basis points, saying ''it is necessary to stay ahead of the curve.'' The implication of Finance Minister's remark is that a parity needs to be maintained between interest rates in India and those prevailing in countries which are major trading and economic partners of India.

There has been a wave of interest rate hikes by Central Banks around the globe last week.

''The European Bank raised interests and there is a hint that the US Federal Bank may do the same'', Mr Chidambaram said.

Mr Chidambaram said last week's interest rate increase in India, was a small correction'' necessary to stop inflation from spiralling.

''I think it is a precautionary move, and I think it was necessary,'' he said.

The Finance Minister said the rate hike by the RBI would dampen inflationary expectations, but not dampen demand for credit.

UNI GS DKS KN1634

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