RBI may Raise Rates One More Time to Check Inflation

Reserve Bank of India Governor Duvvuri Subbarao is between a rock and a hard place. Slowing demand for goods and economic growth rate calls for a pause in interest rate increases. Soaring prices demand that the cost of money rise to cool demand further. His priority is to curb price rise in the larger interests of the population that is seeing more of its income eaten away by higher prices, rather than please investors whose wealth erode due to higher rates. Subbarao may choose to increase rates, for the 12th time since March last year, by 25 basis points in the mid-quarter monetary policy review on Friday for sustained long-term growth.

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