RBI may not ease rates till Jan 2015: Icra

RBI may not ease rates till Jan 2015: Icra
The Reserve Bank of India (RBI) is unlikely to ease rates till early 2015 as the possibility of a below-average monsoon will make it difficult to contain inflation at the targeted 8 per cent by next January, rating agency Icra said.

It, however, said that in spite of this, there will be a pick-up in GDP growth to up to 5.5 per cent in the current fiscal.

"The expectation of below-average rainfall in conjunction with the structural factors that exert stickiness on food and non-food CPI inflation would make it challenging for the RBI to contain CPI inflation below 8 per cent by next January," the rating agency said.

Therefore, "the most likely scenario" is an extended pause for policy rates and monetary easing will be delayed until, at least, early 2015, the agency added.

It said RBI's target of getting consumer price inflation at 8 per cent by January 2015 may not be met, and cited the Met department's forecast of a below trend rainfall this year as the reason for this.

High interest rates will dampen economic revival and high interest rates will also limit any uptick in consumption demand, it said.

Assuming a GDP growth in 5-5.5 per cent range, the agency expects a 12.75-13.50 per cent rise in bank deposits and 13.5-14.5 per cent growth in credit.

Read more about: rbi, interest rates
Story first published: Friday, May 2, 2014, 9:10 [IST]
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