India’s Central Bank Is ‘Neutral’ on Rates, Mahalingam Says
India’s central bank has a “neutral” view on monetary policy and the timing of interest- rate cuts will depend on the European debt crisis and oil prices, saidG. Mahalingam, chief general manager of the Reserve Bank of India’s financial markets department.
“We have reached the peak of rate tightening,” Mahalingam said today at the Bloomberg Link Sovereign Debt Conference in Frankfurt. “We are neutral right now.”
The bank left interest rates unchanged for a third consecutive meeting on March 15. The monetary authority had raised borrowing costs by a record 3.75 percentage points from 2010 through October last year to curb inflation. The RBI unexpectedly cut the amount of deposits lenders need to set aside as reserves on Jan. 24 and March 9 to ease a cash squeeze.
Mahalingam said policy makers aren’t “happy” about the inflation rate, which rose for the first time in five months in February to 6.95 percent. The central bank’s “zone of comfort” is “somewhere around 5 percent,” he said.
“When are we going to start loosening the rate cycle is something which we need to take on the basis of what is going to happen to the euro zone and what is going to happen to oil prices,” Mahalingam said.
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