Mumbai: The Reserve Bank of India will pause its rate tightening cycle if non-food manufacturing inflation stabilises, a deputy governor of the RBI was quoted as saying by a business newspaper. Subir Gokarn was speaking to television channel at a Banker's Trust programme, the paper said. The paper also reported Gokarn as saying the number and overall magnitude of rate increases have a bearing on both inflation activity and inflation expectations, and the RBI expects that over time its rate hikes will lower inflation. Since March 2010, the RBI has raised key interest rate 10 times, by a total of 275 basis points, to rein in stubbornly high inflation. "Slower growth is something we accept as a price of managing inflation, but we don't expect that slowdown to be dramatic," Gokarn said in the interview. "We expect that growth will move from 8.5 percent of last year to 8 percent this year but, along with that, inflation will come down down from 9 percent to 6 percent by the end of the (fiscal) year assuming that no new shocks are to appear." Gokarn also said the interest rate was in a zone where it was possible for the RBI to reverse the policy "fairly quickly" if the circumstances demand. "Our readings of financial performance do not suggest that (the impact of higher rates) is broad-based yet, (but) it may become and that's a possibility that we have accommodated because one of the factors against a 50 (bps hike) this time is that the slowdown we anticipated may gain some momentum," he said. The RBI is expected to raise its policy rate by a total of 75 basis points for the rest of 2011, including the 25 basis point increase last Thursday, unchanged from forecasts in a May 3 poll, a poll found.
Zee News
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