CB Raises Rates by 25 Basis Points
CB Raises Rates by 25 Basis Points
CB Raises Rates by 25 Basis Points
The Central Bank, releasing its monetary policy stance, said the
move was a precautionary measure to contain the build-up of
adverse inflation expectations and the possible acceleration of
demand side inflationary pressures through excessive monetary
and credit expansion.
The Monetary Board also took into account the notable
improvements in fiscal operations, which have resulted in the
overall budget deficit in 2016 declining to envisaged levels. The
Board was of the view that these improvements, together with the
substantial upward movements already observed in market
interest rates, have reduced the required adjustment in policy
interest rates, it said in the statement.
The index had lost 2.1 percent through Thursday since 7 March,
when the IMF called for monetary policy tightening if credit
growth or inflation do not abate.
The Central Bank raised interest rates for the first time in eight
months, saying tighter policy was a precaution against a build-up
of inflationary pressures.
The rate hike could help stabilise the rupee as rising imports and
outflows due to rupee bond sales by foreign investors have
exerted pressure on the currency, analysts said.
The Central Bank raised the spot rupee reference rate by 25 cents
to 151.60 on Monday.
They have net-sold Rs. 63.3 billion of such instruments so far this
year.
Posted by Thavam