New Delhi: The Reserve Bank of India is likely to keep interest rates stable in the near term and may ease its monetary policy stance later in the year, a unit of rating agency Moody’s has said.
“RBI looks set to leave interest rates unchanged in the near term. Given that inflation has cooled in recent times, a loosening cycle may commence toward the end of the year which will help to support economic growth amid weakening external demand,” Sherman Chan, an economist with Moody’s Economy.com, said in a statement.
The RBI has raised interest rates at least six times in the last couple of years to check inflation, and tighten money supply to rapidly growing sectors to prevent overheating.
Higher interest rates in the country, however, have led to a surge in foreign inflows. This pushed rupee around 15% higher against the US dollar, hurting the country’s exports and leading to job losses in export-oriented sectors.
With export growth likely to moderate this year on the back of weakening US demand and a subsequent global economic slowdown, lower interest rates may help to prevent a loan crisis in the emerging powerhouse, said Moody’s Economy.com, a subsidiary of global credit rating agency Moody’s Corporation.
The statement comes within days of housing finance company HDFC’s Chairman Deepak Parekh and ICICI Bank CEO K V Kamath saying interest rates could soften from April onward if RBI keeps interest rates and cash reserve ratio unchanged. The central bank is scheduled to announce its quarterly review of monetary policy on 29 January.