India said it will halve the gap between monetary policy decisions, aligning the frequency of the central bank’s meetings closer with others in the world’s biggest economies.
The Reserve Bank of India will release monetary-policy statements every six weeks, compared with the once a quarter currently, it said today after raising interest rates more than economists expected. The next announcement will be on Sept. 16.
Accelerating inflation in India has led to strikes and street rallies and prompted Governor Duvvuri Subbarao to raise interest rates four times this year, including two inter-meeting increases. The greater frequency of rate decisions would reduce speculation over policy actions, economists say.
“Scheduling more meetings indicate the likelihood of more policy adjustments and in the current environment of a tightening bias, it would imply that the chance of more hikes has increased,” said Dariusz Kowalczyk, a Hong Kong-based senior economist and strategist at Credit Agricole CIB. “It will also help in managing inflation expectations.”
The U.S. Federal Reserve and the Bank of Canada schedule rate-setting meetings eight times a year, while the Bank of Japan has 14 such gatherings annually. Policy makers at the European Central Bank, the Bank of England, the Bank of Korea and Bank Indonesia meet monthly to decide on rates, while the Reserve Bank of Australia release such decisions 11 times a year.
Among other Group of 20 nations, China doesn’t have scheduled decisions while Argentina doesn’t typically use interest rates as a monetary policy tool.
Unscheduled Decisions
The Indian central bank has made 13 inter-meeting changes to borrowing costs since the beginning of 2008, compared with three times for the Fed and none for the ECB and BOE.
“This is a welcome move and will improve the transparency of monetary policy,” said Brian Jackson, a Hong Kong-based senior emerging markets strategist at Royal Bank of Canada. “It should reduce the need to make rate changes between meetings and so will reduce speculation about off-schedule moves.”
The Reserve Bank of India raised the reverse repurchase rate to 4.5 percent from 4 percent and the repurchase rate to 5.75 percent from 5.5 percent, according to a statement from the central bank in Mumbai.
The reverse repurchase rate may be raised to 5.25 percent by the end of 2010, while the repurchase rate may climb to 6.25 percent in the same period, Kowalczyk said.
The Reserve Bank also boosted its estimate for wholesale- price inflation for the year to March to 6 percent from 5.5 percent and the economic growth forecast to 8.5 percent from 8 percent. Consumer prices paid by industrial and farm workers in India are running close to 14 percent, government data show. That’s the most after Venezuela’s 32 percent inflation rate, according to Bloomberg data compiled from 82 countries.
Source http://www.bloomberg.com/news/2010-07-27/india-to-increase-frequency-of-interest-rate-meetings-to-every-six-weeks.html
The Reserve Bank of India will release monetary-policy statements every six weeks, compared with the once a quarter currently, it said today after raising interest rates more than economists expected. The next announcement will be on Sept. 16.
Accelerating inflation in India has led to strikes and street rallies and prompted Governor Duvvuri Subbarao to raise interest rates four times this year, including two inter-meeting increases. The greater frequency of rate decisions would reduce speculation over policy actions, economists say.
“Scheduling more meetings indicate the likelihood of more policy adjustments and in the current environment of a tightening bias, it would imply that the chance of more hikes has increased,” said Dariusz Kowalczyk, a Hong Kong-based senior economist and strategist at Credit Agricole CIB. “It will also help in managing inflation expectations.”
The U.S. Federal Reserve and the Bank of Canada schedule rate-setting meetings eight times a year, while the Bank of Japan has 14 such gatherings annually. Policy makers at the European Central Bank, the Bank of England, the Bank of Korea and Bank Indonesia meet monthly to decide on rates, while the Reserve Bank of Australia release such decisions 11 times a year.
Among other Group of 20 nations, China doesn’t have scheduled decisions while Argentina doesn’t typically use interest rates as a monetary policy tool.
Unscheduled Decisions
The Indian central bank has made 13 inter-meeting changes to borrowing costs since the beginning of 2008, compared with three times for the Fed and none for the ECB and BOE.
“This is a welcome move and will improve the transparency of monetary policy,” said Brian Jackson, a Hong Kong-based senior emerging markets strategist at Royal Bank of Canada. “It should reduce the need to make rate changes between meetings and so will reduce speculation about off-schedule moves.”
The Reserve Bank of India raised the reverse repurchase rate to 4.5 percent from 4 percent and the repurchase rate to 5.75 percent from 5.5 percent, according to a statement from the central bank in Mumbai.
The reverse repurchase rate may be raised to 5.25 percent by the end of 2010, while the repurchase rate may climb to 6.25 percent in the same period, Kowalczyk said.
The Reserve Bank also boosted its estimate for wholesale- price inflation for the year to March to 6 percent from 5.5 percent and the economic growth forecast to 8.5 percent from 8 percent. Consumer prices paid by industrial and farm workers in India are running close to 14 percent, government data show. That’s the most after Venezuela’s 32 percent inflation rate, according to Bloomberg data compiled from 82 countries.
Source http://www.bloomberg.com/news/2010-07-27/india-to-increase-frequency-of-interest-rate-meetings-to-every-six-weeks.html
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