According to Economic Research Report by Macquarie, the Reserve Bank of India(RBI) may hike the Cash Reserve Ratio next month and policy rates by April in view of the rising inflation and excess liquidity in the money markets.
The report states that the RBI has already started implementing the exit strategy by cutting the Statutory Liquidity Ratio (SLR) in October and observes that the RBI will have to take further liquidity tightening measures, such as a CRR hike, in the December 09-January 10 period with the precise timing of the action depending on inflation, credit pick-up and strength of capital inflows.
Macquarie expects RBI to cumulatively hike policy rates by 100 basis points over the course of the next fiscal year.
The report also touched upon exchange rates and states that the rupee is expected to appreciate sharply against the US dollar by middle of 2010. The report said, “We maintain our expectations of INR/USD forecast of 46 for end-December and 43 for June 2010,” and adds “it is quite likely that the RBI will have a challenging time managing capital inflows.”
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