New Delhi, Oct. 24: RBI governor Raghuram Rajan is likely to focus on balancing growth and containing inflation in the second-quarter monetary policy review next week.
He will also take measures to avoid the adverse impact of the US Federal Reserve’s decision to pull back money it had pumped into the global economy, which could happen later this year.
“I discussed a whole set of issues with the finance minister, including the state of the economy,” Rajan told reporters after meeting finance minister P. Chidambaram here today.
Rising food prices and inflationary expectations could prevent the central bank from cutting key rates as demanded by the industry.
American brokerage Morgan Stanley has said the RBI is likely to increase the short-term lending rate, or the repo, by another 25 basis points in the policy review on October 29 as inflation continues to hover above its comfort zone.
“As inflation, both WPI and CPI, remain elevated and surprised on the upside last month, we expect the RBI to increase the repo rate by 25 basis points to 7.75 per cent to anchor inflationary expectations,” Morgan Stanley said in a note.
Rising food prices, especially of onion, pushed up September inflation to a 7-month high of 6.46 per cent.