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Ahead of the crucial meeting of the US Federal Reserve and his own mid-quarterly monetary policy review, central bank governor Raghuram Rajan on Tuesday met finance minister P Chidambaram.
“The RBI and the finance ministry are in consultation over a gamut of issues. This was a part of it,” Rajan told reporters after the hour-long meeting. The Reserve Bank of India is scheduled to release the mid-quarterly monetary policy review this Friday amidst expectations of a cut in key rates. Significantly, this will be the first such exercise under Rajan who took over as the RBI Governor earlier this month.
While higher-than-expected headline inflation will be a key factor in the policy review, the two-day meeting of the US Federal Reserve is also likely to play a major role. The crucial meeting, that starts Tuesday, is widely expected to announce tapering of the Fed’s $85 billion a month bond-buying programme. India is one of the main emerging economies that is likely to be impacted by the withdrawal of the quantitative easing.
But PM’s Economic Advisory Council chairman C Rangarajan had dismissed any further impact of tapering of the quantitative easing by the US Fed. “The impact of the tapering has already been digested. The market has already reacted to that,” he said on Monday, stressing that it would have a global impact.
Bankers want RBI to cut rate
With festival season round the corner, bankers are pressing for cut in policy rates by Reserve Bank in its monetary policy later in the week. “We have made our recommendations for releasing liquidity, making it more accessible, making it less expensive,” State Bank of India chairman Pratip Chaudhuri said. Indian Overseas Bank chairman and managing director M Narendra said, “It is our wish that RBI should reverse the liquidity tightening measure taken recently so that loan becomes cheaper.”
In its last policy review in July, the RBI chose to keep all key interest rates unchanged on account of weak rupee.