Economy

Ballooning inflation may prompt RBI to up CRR, policy rates

A view of the RBI building in New Delhi. File Photo: V. Sudershan

A view of the RBI building in New Delhi. File Photo: V. Sudershan  

Zooming inflation, a build-up of inflationary pressures and cues from global markets could impel the Reserve Bank to tighten its monetary policy stance, bankers said.

The apex bank’s third-quarter quarter review of its monetary policy, scheduled for Friday, is therefore being keenly watched as any hike in the cash reserve ratio -- the portion of deposits banks keep with RBI -- or policy rates will push up lending rates in the banking system making home, auto and retail advances dearer to the common man, bankers said.

“Signals of monetary policy tightening in the US and China may add to pressure on RBI to hike rates. Also, inflationary pressures are high. One can expect a 0.5 per cent hike in the CRR,” IDBI Bank’s Executive Director R K Bansal, told PTI.

Bansal said that a marginal hike in the repo and reverse repo rates (at which RBI lends and borrows) also cannot be ruled out as the apex bank may want to signal an upward movement in interest rates going forward.

Skyrocketing prices of essential commodities and food items pushed up consumer price inflation to 16.81 per cent for the week ended January 9. WPI-based inflation expanded to a year’s high of 7.31 per cent in December.

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Printable version | Jul 6, 2020 5:11:02 AM | https://www.thehindu.com/business/Economy/Ballooning-inflation-may-prompt-RBI-to-up-CRR-policy-rates/article16839381.ece

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