CLSA’s Malik Says India’s RBI Will Raise Interest Rates Further

Rajeev Malik, a senior economist at CLSA Asia Pacific Markets in Singapore, comments on today’s decision by the Reserve Bank of India to raise interest rates for the fourth time this year.

Governor Duvvuri Subbarao increased the repurchase rate to 7.50 percent from 7.25 percent, according to an e-mailed statement today.

“Inflation still remains above RBI’s comfort level, while monetary transmission has strengthened. The key operative element is while the Reserve Bank will continue with its anti-inflationary stance, the extent of policy action needs to balance the adverse movements in inflation with recent global developments and their impact on growth.

“From here on, the pace of increases is likely to be slower. They aren’t done with the tightening.

“There’s nothing in this policy that will prompt me to change our expectation of 8 percent on repo rate for this year.”

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