Wednesday, June 6, 2012

When RBI revises rates, and what it means at the bank

......Normally, a rate cut is a signal to banks to lower interest rates. However, several factors at play complicate decision-making by the RBI, especially in trying to balance the twin objectives of keeping inflation anchored and boosting economic growth. Rate hikes increase the cost of capital; reductions have the opposite effect. It therefore becomes very easy for everyone to associate a tight monetary policy stance with growth suffocation...........

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