Tuesday 23 September 2008


INDIA TO CUT RATES IN 2009, NO INCREASE THIS YEAR, GOLDMAN SAYS

Anil Varma

Bloomberg, September 23, 2008

India's central bank may cut benchmark interest rates in the first quarter of 2009 for the first time in more than five years as inflation and growth slow, according to Goldman Sachs Group Inc.
The Reserve Bank of India will leave the overnight lending rate unchanged at a seven-year high for the rest of 2008 as it shifts focus to reviving growth from curbing inflation, Tushar Poddar, a Mumbai-based economist at the U.S. securities firm, wrote in a research note today. Declining commodity prices will help cool India's inflation from near a 16-year high, he said. The central bank has raised the rate by 3 percentage points since October 2004.

“We think the interest-rate cycle has peaked,'' Poddar wrote. “With commodity prices coming off, demand slowing and expectations that inflation will fall, the case for raising rates has weakened.''

India's benchmark 10-year bond yields, which reached a seven-year high of 9.55 percent in July, have fallen by more than a percentage point since then, suggesting investors are paring bets for rate increases. The five-year interest-rate swap rate has dropped almost 2 percentage points from a July peak of 10.46 percent.

The rate of inflation in Asia's third-largest economy tripled this year to 12.14 percent in the first week of this month. The rate touched 12.63 percent, the highest since 1992, in August.

(...) [artículo aquí]

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